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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#201

Post by dkarl »

lokar wrote: post #93
stego-tech wrote: post #87

Earlier quoted context omitted.

Except those firms currently have enough money to lobby politicians to oppose any changes that would meaningfully increase supply, and also hold outsized stakes in the companies and suppliers who would build said stock. It’s a rigged game top to bottom. A free market would’ve fixed this years ago, but this is not a free market anymore. The difference is I advocate control of necessity markets returning to government…

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.

> The solution is the (hard and slow) work to engage and educate voters.

It is indeed hard work, especially if you want to influence people who aren't engaged in politics to vote. I find that people who aren't engaged with politics are most receptive to extreme messages that discourage them further. They're all ears if you tell them that the system is rigged and it's impossible for people to defeat the corporations or the elite. It's much harder to convince them that voting matters.

Re: The Folk Economics of Housing

#202

Post by rayiner »

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…

Supply and demand requires thinking about equilibria and intersecting curves and is out of the reach of a largely innumerate population. Most Americans don’t even really have a strong grasp on millions versus billions versus trillions.

Americans also think in terms of stories with actors, and supply and demand doesn’t have any obvious actors. “Prices are high because bad people are choosing to keep them high” is an easy narrative for people to understand. There’s an obvious villain, and the success simply requires the hero to defeat the villain. This leads to a funny meme: https://www.reddit.com/r/neoliberal/comments/13l1lmn/present...

Re: The Folk Economics of Housing

#203

Post by seanmcdirmid »

mediaman wrote: post #143
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…

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 affo…

I never argued that new supply is bad. My only observation is that new supply does not always lead to price decreases since demand isn't fixed (e.g. Seattle isn't a closed system). I think another comment that mentioned equilibrium is probably a better way of putting it. It can take a lot of supply before the price point changes as new supply is added because a lot of people are waiting on the sideline to pay X that is already being paid for existing supply (but they are unable to pay X+1 to force someone out and take their place).

Re: The Folk Economics of Housing

#204

Post by [deleted] »

crooked-v wrote: post #196
supportengineer wrote: post #191

Earlier quoted context omitted.

In other words, housing capacity is created and "trickles down" to the bottom. If there was such as thing as a $250k house within a few hours drive, I would buy all of them and just sit on them, maybe rent them out.

What you're missing here is that housing is only a good investment because it's in such short supply. If plenty of $250K houses were available, they wouldn't be doubling in price every few years, and "sitting on them" and eating the maintenance costs would just lose money compared to other investments.

[deleted]

Re: The Folk Economics of Housing

#205

Post by foobarian »

9rx wrote: post #134
Lord-Jobo wrote: post #124

Earlier quoted context omitted.

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.

> I genuinely want to see a breakdown on what is increasing building costs so much. It is just general demand, really. Every step of the way can charge more, as compared to 15 years ago, because people are willing to pay more for their services. Like the headline suggest, the solution is to increase supply. Except, not of houses, but the inputs that go into houses (materials, labor, etc.). Until supply is met there,…

> As mentioned, if you get all the software developers building houses instead

Back in the day I would often run into people who would mention something like "oh yeah, my Dad built our house." Wonder what happened to that? Thinking on doing this right now in our neighborhood, I can see lasting 5 minutes before busybodies and town inspectors showed up with stop orders

Re: The Folk Economics of Housing

#206

Post by [deleted] »

ASinclair wrote: post #73
starkparker wrote: post #32

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. I keep seeing this, but if the housing being vacated is in a different, less-desirable market, it's a bit tree-falling-in-the-woods for locals. I…

> If a $450,000 house in a Chicago suburb is freed up by its owners moving to a $700,000 condo in Seattle, the people who can't afford a house in Seattle don't see the benefit of the condo building and aren't going to buy the house in Chicago Is the existence of the $700,000 condo the limiting factor for those people moving? If it isn't built would they instead bid up an existing unit in Seattle and put it more out o…

[deleted]

Re: The Folk Economics of Housing

#207

Post by jillesvangurp »

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…

New construction is kept expensive mostly through complex rules that often exist to protect the interests of those doing the construction work, those owning existing houses and property, etc. It's a form of artificial scarcity. This scarcity is crucial to justifying real estate prices, propping up mortgages and the banks that provide them, etc.

There's no technical reason why building some shelter that keeps the rain out and the heat/cold where it should be is not something that could not be done cheaply at large scale using affordable materials. People have been building shelter for tens of thousands of years and it's easier than ever with modern materials. It's not rocket science to keep people dry and comfortable.

People routinely buy recreational vehicles that, because they have wheels, are not considered houses. So, suddenly there are much less rules and you can just produce those efficiently in factories. Except getting permission to park those and live in them is really hard to come by in many places. It's OK for recreational use. But not for living permanently. Which of course some people do anyway. But it's highly stigmatized.

Recreational vehicles come out of factories. Houses are built artisanally at great cost. The only functional difference that matters is mobility and wheels. Why should people not be able to get a nice second hand RV for a few thousand dollars and park it in a nice spot and live there?

Answer: it would immediately devalue the notion of owning brick and mortar.

Re: The Folk Economics of Housing

#208

Post by WalterBright »

glial wrote: post #200
WalterBright wrote: post #199

Earlier quoted context omitted.

Why would he leave it vacant?

Because the value always goes up and managing renters and repairs is a PITA.

> value always goes up

History shows us that there are many bear markets in housing. There's also Detroit.

I sold my previous home in 2000. It recently sold for 4x what I sold it for. A great ROI, eh? If I'd invested in the S&P 500 in 2000, it went up 6.61x. And I didn't have to pay property taxes, insurance, real estate commissions, maintenance, repair vandalism, clean up after teen hookup parties, evict squatters, or any of my time.

Re: The Folk Economics of Housing

#209

Post by roenxi »

seanmcdirmid wrote: post #203
mediaman wrote: post #143

Earlier quoted context omitted.

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 affo…

I never argued that new supply is bad. My only observation is that new supply does not always lead to price decreases since demand isn't fixed (e.g. Seattle isn't a closed system). I think another comment that mentioned equilibrium is probably a better way of putting it. It can take a lot of supply before the price point changes as new supply is added because a lot of people are waiting on the sideline to pay X that…

The argument is clear, but where you are coming from or going to with this isn't. You're describing a situation where Seattle desperately needs large amount of construction of new housing. If we're hypothesising this mob of people who will move to Seattle as soon as they see a house for $700,000, house prices in Seattle are going to have a floor of around $700,000. Someone is going to need to build houses for those people if anyone wants to pay less than that.

Thanks to the magic of Simpson's Paradox it is possible to have the average house price go up even if houses get more affordable for literally everyone, which seems to be the situation you're going to. Which is true and interesting, but not really politically important. Obscure mathematical effects do draw attention to the fact that one metric isn't enough to develop policy, but shouldn't eclipse the fact that more houses is what people want, need and should be getting. There is this crowd of people who want to move to Seattle and live in nice houses, let them do that and pay people in Seattle to build them. Otherwise everyone will have to compete for existing housing stock.

Re: The Folk Economics of Housing

#210

Post by mediaman »

seanmcdirmid wrote: post #203
mediaman wrote: post #143

Earlier quoted context omitted.

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 affo…

I never argued that new supply is bad. My only observation is that new supply does not always lead to price decreases since demand isn't fixed (e.g. Seattle isn't a closed system). I think another comment that mentioned equilibrium is probably a better way of putting it. It can take a lot of supply before the price point changes as new supply is added because a lot of people are waiting on the sideline to pay X that…

New supply obviously increases demand because shifting the supply curve to the right (more quantity) reduces the clearing price, which increases demand. That's econ 101. In this classic case, increasing supply both decreases price and increases demand.

But what you're arguing is different: that increasing supply has no effect at all on the clearing price. That would require an unusual demand "curve" that is perfectly flat, i.e., perfectly elastic, where there is infinite demand at a given price and zero demand at just a dollar above that price (or else that infinite demand would have already pushed prices up higher than the pre-existing price).

This clearly doesn't make any sense for the housing market; home buyers are sensitive to price, there is not infinite demand, some people have more or less desire to pay for a house. In fact, perfectly elastic markets essentially don't exist, and very low slope demand curves only exist in some unusual edge cases in markets (such as commodities that are near-perfect substitutes).

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