Paying for Dirt: Where Have Home Values Detached from Construction Costs?

construction cost relative to home prices is interesting to a company like buildzoom because they're in the construction business (and finding the coming construction booms is important to them), but if you want to understand home price inflation, it's not that interesting at all. shiller, of case-shiller fame, also showed that home prices are disconnected from construction costs in his book irrational exhuberance.

in a stable economy, you'd expect home prices to roughly follow GDP or inflation, not building cost. if you graphed median home prices against GDP, you'd literally see the bubble (between median home price and GDP) starting to form in the 80's and popping in 2008.

why? financial engineering--we turned homes from places to live into investments. greed fueled home price inflation. and real estate investment was accessible to the average american, unlike more complex financial instruments like bonds or derivatives. in classic bubble fashion, people knew (and still know) that prices are irrational, but we all think we can make a boatload and get out before the bubble pops (again).

but these are homes we're talking about, not some abstract concept like a futures contract on the production of black-eyed peas. these are not simple commodities that we can easily replace with a substitute. it's where we live.

and yet, we continue to allow financiers and investors to extract wealth through higher rents (now nearing 50% for many residents of big cities), regulatory capture, and collaterized debt (the risk on which is passed to taxpayers). but "everyone else is doing it" so it's ok, right?

This quote really stands out to me. Is this demonization of opposing viewpoints a new thing, or am I just noticing it more in the last two years?

1. Make the city suck

2. Get the housing vacancy rate to 5.5%

And of course he says this to encourage everyone to work toward #2, and the way to do that without displacing anyone is to build new housing.

I don't really understand the opposite logic, which the NIMBYs like to use, saying that building new housing will drive the price up.

I mean, I am not some kind of libertarian free-market cheerleader, but it shouldn't be that controversial to say that a market exists, that the way to bring down the price in the face of overwhelming demand is with supply.

People point to how expensive newly-built market-rate housing is, but that's a symptom of the shortage. People want to live in good cities. If there's not a new home for them, they'll pay even more for a home someone lives in, so prices go up and a community gets displaced.

In 2016 SF built 5,000 units, a record, and rents and owner move-in evictions both fell for the first time in a while. (They are not going to repeat that production in 2017 or 2018, in large part due to Prop C).

Across all 50 states, areas where population growth exceeded housing supply growth saw price increases: https://twitter.com/lenkiefer/status/871785655164182529

Austin, Houston, and Dallas don't have very restrictive zoning or rules around new home construction, and they lap California in home building and have seen rents hardly rise at all.