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Austin’s surge of new housing construction drove down rents

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Re: Austin’s surge of new housing construction drove down rents

#661

Post by estearum »

pinkmuffinere wrote: post #453
throwaway27448 wrote: post #437

Earlier quoted context omitted.

Sure, so long as the balance involves not housing people which is pretty sick and twisted

I never claimed the balance will occur at a point that I like. This is just math, it’s not a political stance. If you want more homes, go build homes.

Then your point is meaningless. I (GP) was also pointing out the same equilibrium mechanic. The specific point I was making is that all evidence points to the equilibrium (in the US and elsewhere) being at a point that does not make housing easily attainable, and so becomes a political liability.

"Go build homes [beyond equilibrium]" is not a solution

Re: Austin’s surge of new housing construction drove down rents

#662

Post by bpt3 »

jaapz wrote: post #640
taffronaut wrote: post #594

Earlier quoted context omitted.

I have struggled to understand why houses don't get built and land sits idle for years. I can only assume that it's significantly more complicated. I'm not trying to excuse the complications. I guess if the house prices are forecast to go up, you build some houses, but not all that you can because the longer you wait, the higher the profit will be on the ones you start later. If house prices are going down, even if i…

Why would you build on a plot of land when the plot of land itself is already appreciating in value with you doing nothing to it Building is risky and costly Having an asset that appreciates on its own regardless of what you do with it is not

Holding costs of land are far from $0 in any major metropolitan area. Sitting on it involves its own form of risk.

Vacant land that's desirable is often held back from development due to zoning or infrastructure issues.

Re: Austin’s surge of new housing construction drove down rents

#663

Post by amelius »

pibaker wrote: post #90
amelius wrote: post #10

Earlier quoted context omitted.

What if the people in power don't want prices to go down?

Over 60% of Americans are homeowners. In any functioning democracy, they ought to be the people in power.

That's the tyranny of the majority. This is not how a functioning democracy should behave.

https://en.wikipedia.org/wiki/Tyranny_of_the_majority

Re: Austin’s surge of new housing construction drove down rents

#664

Post by estearum »

samrus wrote: post #644
estearum wrote: post #221

Earlier quoted context omitted.

New construction has already decelerated in Austin due to falling prices, which compresses already-near-zero margin on real estate development. So yes, it really is "just build more housing." The problem is: why would you build more housing as prices fall?

Thats how supply demand works right? Its a stable equilibrium. When supply is low, prices rises to entice supply, supply increases to match demand, prices fall, the rate of increase of supply falls as well until supply approaches to meet demand. It prevents oversupply. If supply slips below demand again prices will rise to pull it back up Theres no problem here. Thats how the system should work

To some degree yes. However, the problem I'm pointing to is that the equilibrium in several developed economies (esp US) seems to be at a level that makes housing unattainable for a huge number of people.

I.e. Probably due to Baumol's disease, there is no price at which it is both 1) profitable to invest in constructing new housing and 2) makes housing broadly attainable to people.

This is a problem. There are a lot of goods (like a platinum-bodied iPhone) that cannot achieve both (1) and (2). However, unlike all of these other goods, housing is a necessity with an extremely high floor on demand.

Re: Austin’s surge of new housing construction drove down rents

#665

Post by bpt3 »

bo0tzz wrote: post #614
kakacik wrote: post #589

Earlier quoted context omitted.

... but your own housing isn't any form of basic human right, its a luxury all around the world and always has been. Now I completely understand folks who come out of uni and see the salaries (sans faangs and generally devs and few other lucky positions), the prices and the emotions of missing out come easily. But it isn't a right, just because you would like it. Same as I don't have a right to a car at price I would…

The Universal Declaration of Human Rights, Article 25.1: > Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.

So if I declare a right to immortality, then no one dies?

It's almost like those words are the product of useless bureaucrats, rather than an actual right.

Re: Austin’s surge of new housing construction drove down rents

#666

Post by KellyCriterion »

Sankozi wrote: post #544
KellyCriterion wrote: post #494

Earlier quoted context omitted.

This is theoretical MBA101 speech: In reality, those ideas do not apply to the housing market, esp. as there is no real competition; and because the demand is absolutely inelastic (if we are already applying in MBA-wording universe) Also, that this is true you can see if you compare to housing markets which "are more free than the Australian"

Of course demand is elastic. Do you think, people will migrate to a city with an unaffordable housing (unaffordable for them)? Unless you are living in North Korea, the competition is also there.

No, it is inelastic:

- inelastic means the demand is more or less independet of the price; you can't "just stop renting & living" if prices are going up, your options to bypass are highly limited -> therefore its called >inelastic<

Re: Austin’s surge of new housing construction drove down rents

#667

Post by estearum »

bpt3 wrote: post #658
estearum wrote: post #297

Earlier quoted context omitted.

Grocery stores don't require millions to billions of dollars of capital to execute each new transaction. So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estate investment opportunities are often measured by their advantage (measured in fractions of a percentage, .2% advantage being considered solid) over 10 Year Treasuries or S&P…

> Grocery stores don't require millions to billions of dollars of capital to execute each new transaction. Neither do homebuilders, because homes don't cost millions to billions to build (high end custom homes can cost millions, but that's not what we're talking about here). > So it's not the margin itself but actually the spread between the margin and what investors could get by investing in alternatives. Real estat…

Even a small (~10 home) development, of which we need hundreds of thousands, will require millions in financing. And as the development gets smaller and requires less financing, the economics get a bit worse due to ~fixed cost of land acquisition, development, and infrastructure/utilities.

> Many companies often lose money, due to incompetence or bad luck

One of those signs of incompetence or bad luck is building a bunch of new supply into a market with falling prices, in which case you will find yourself not among those with healthy margins ;)

Re: Austin’s surge of new housing construction drove down rents

#668

Post by estearum »

wnc3141 wrote: post #618
estearum wrote: post #221

Earlier quoted context omitted.

New construction has already decelerated in Austin due to falling prices, which compresses already-near-zero margin on real estate development. So yes, it really is "just build more housing." The problem is: why would you build more housing as prices fall?

Of its still profitable to do so, considering opportunity costs for the capital, firms will continue to build. However, it's so expensive to build that these project wind up not becoming bankable very quickly. I think that's the underlying issue that needs to be addressed.

Correct -- this is what I'm pointing to.

The problem is the cost of inputs. Classic Baumol's disease. We cannot escape Baumol's disease by just saying "hurrr durr just gotta get people to finance projects into a market with falling prices!"

Re: Austin’s surge of new housing construction drove down rents

#669

Post by left-struck »

pclowes wrote: post #176

Its wild how the solution to housing costs is really just: Build more housing. Keep law and order. No it doesn’t need to be “affordable”. Yes rent control is a terrible idea. Just build more housing. Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.

It’s a difficult problem not because we don’t know the simple solutions (supply and demand). It’s difficult because the people who have the majority vote also typically own the houses and they obviously don’t want the prices to go down. This is not just speaking about the US, many countries are facing this issue

Re: Austin’s surge of new housing construction drove down rents

#670

Post by austin-cheney »

pclowes wrote: post #176

Its wild how the solution to housing costs is really just: Build more housing. Keep law and order. No it doesn’t need to be “affordable”. Yes rent control is a terrible idea. Just build more housing. Note: that the US already has plenty of housing and housing costs basically go up in areas of low crime relative to economic opportunity. If you build housing, but allow crime to rise, you have wasted everybody’s time.

There is a massive difference between rental prices and home ownership. There is a further difference apartment rentals and single family rentals.

Rented apartments are a commodity with features. Owned houses are fixed assets with different economic rules.

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