The Folk Economics of Housing • Hacker News Board

Re: The Folk Economics of Housing

#71

Post by whall6 » Fri, Aug 15, 2025, 4:37 PM UTC

starkparker wrote: post #32

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…

> 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…

There doesn’t need to be a connection between the purchase and sale events. Any marginal unit of inventory added to a market will place downward pressure on the price of that inventory (i.e., make it more affordable). The reverse is true for a marginal bid for inventory.

The effect is so minimal when you zoom into a single sale of one home and purchase of one condo, but in aggregate this causes real noticeable price movement.

Re: The Folk Economics of Housing

#72

Post by stego-tech » Fri, Aug 15, 2025, 4:37 PM UTC

whall6 wrote: post #46

stego-tech wrote: post #26

Earlier quoted context omitted.

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 specu…

Curious for the source on the 25% figure if you wouldn’t mind sharing.

It was a series of studies earlier this year that made media rounds; searching for “Wall street housing 25%” returns a myriad of results from mainstream sources citing a number of different studies and papers:

https://fortune.com/2025/07/08/investors-buying-25-us-homes-...

I’m on mobile and can’t dig into total ownership figures at the moment, but I do know that in the sunbelt states property acquisition by investment firms has been a real issue. Even slumlords are getting bought out at top dollar, and affordable housing is increasingly just a trailer rented on land owned by - you guessed it - PE or REITs at consistently inflating rents.

Re: The Folk Economics of Housing

#73

Post by ASinclair » Fri, Aug 15, 2025, 4:38 PM UTC

starkparker wrote: post #32

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…

> 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 of reach of existing Seattle residents?

Re: The Folk Economics of Housing

#74

Post by lcnPylGDnU4H9OF » Fri, Aug 15, 2025, 4:38 PM UTC

greenie_beans wrote: post #31

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…

so you are suggesting that one house is better than two to alleviate supply? this is exactly why market incentives isn't the cure. we would have more housing if we built more housing. if we built double the housing, then we would be in an even better place. this logic makes zero sense to me.

> so you are suggesting that one house is better than two to alleviate supply?

No, they are saying that building one high-end house still has the slightly unintuitive effect of increasing the supply of low-end homes. They also give their reasons for believing this.

Re: The Folk Economics of Housing

#75

Post by tempestn » Fri, Aug 15, 2025, 4:38 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…

The cost of building is one reason why supply is constrained. It doesn't follow from there that increased supply wouldn't reduce prices.

Re: The Folk Economics of Housing

#76

Post by connicpu » Fri, Aug 15, 2025, 4:38 PM UTC

lcnPylGDnU4H9OF wrote: post #48

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…

> 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.

If you reach a point where housing supply out paces demand plus the vacancy rate those investors are willing to tolerate, that's when rent prices will finally start to drop as the big landlords need to generate more revenue to keep up the capital and operational expenses. And if rent prices drop far enough then it will no longer be profitable to spend all that capital snapping up starter homes, and eventually may even be placed back on the market.

Re: The Folk Economics of Housing

#77

Post by lokar » Fri, Aug 15, 2025, 4:39 PM UTC

potato3732842 wrote: post #7

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…

>In many areas the new houses are built by a few large home builders doing a few large developments, and the new apartments are owned by a few large corporate owners. That can slow down prices reaching their market value. Because all the same voters (demographically, if not also frequently literally the same individuals) voted for a bunch of red tape that's only passable for the big vertically integrated businesses a…

Yep. You need deep pockets to eat the carrying cost of a property while waiting years to get approvals.

Re: The Folk Economics of Housing

#78

Post by whall6 » Fri, Aug 15, 2025, 4:39 PM UTC

lcnPylGDnU4H9OF wrote: post #48

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…

> 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.

What data do you have to support that only hedge funds and smaller investors are purchasing new builds?

Re: The Folk Economics of Housing

#79

Post by lokar » Fri, Aug 15, 2025, 4:39 PM UTC

msgodel wrote: post #12

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…

I think what people want is less migration (both domestic and international) but that's not an option. Since it's the primary thing they want they're doing anything they can to get it including essentially destroying their own neighborhoods.

And then they complain (a lot) that their kids have to move away to afford housing.

Re: The Folk Economics of Housing

#80

Post by ruined » Fri, Aug 15, 2025, 4:39 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…

investors actually tend to purchase cheaper homes

https://www.redfin.com/news/investor-home-purchases-stabiliz...