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The Folk Economics of Housing

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Re: The Folk Economics of Housing

#91

Post by bluGill »

dkarl wrote: post #54
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…

NIMBYs actively target this misconception. "New housing is luxury housing." > eventually the price drops happen on the older, smaller homes at the bottom end of the market I'd be interested in how long "eventually" takes for single-family homes. I think for rental units it happens very quickly.

depends, it takes decades and often people remodle their old houst thus bringing up the value.

Re: The Folk Economics of Housing

#92

Post by whall6 »

stego-tech wrote: post #72
whall6 wrote: post #46

Earlier quoted context omitted.

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 investmen…

Is this housing that they are purchasing just being sat on? I would think that these are being purchased to be rented out (thereby still increasing housing supply), not just held. Homes are depreciating assets.

Re: The Folk Economics of Housing

#93

Post by lokar »

stego-tech wrote: post #87
lokar wrote: post #58

Earlier quoted context omitted.

But (the sound) financial models that lead PE and others to this investment are built around the assumption that supply will be artificially limited. If you build enough they will see reduced returns and back off.

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.

Re: The Folk Economics of Housing

#94

Post by kypro »

Immigration is a similar debate where supply and demand goes out the window for political reasons.

Here in the UK it's really hard to convince people that it's really hard to address our housing shortage through building alone when we bring in about a million people every year. Even a lot of economists seem to think supply/demand doesn't apply when it comes to wages and house prices if you introduce immigration as a variable.

Unless it's undeniable I find people will just believe whatever suites them personally. Which is fair enough. I guess I'm just surprised at how unconscious this bias is for most people. Or at the very least they seem to truly believe that the housing market is an exception to supply/demand dynamics.

Re: The Folk Economics of Housing

#95

Post by kube-system »

gorfian_robot wrote: post #52
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…

I see those going up all over the US West. I know people who live in a few. Always feels like they live in a mid-range hotel. IDK why anyone would want that.

Yeah, the point is that new apartments are ... new apartments. "luxury apartment" is meaningless marketing copy that every developer uses for every apartment building. What is marketed as a "luxury apartment" today will just be a "regular apartment" in 20 years.

Re: The Folk Economics of Housing

#96

Post by jeremyjh »

TulliusCicero wrote: post #66
SoftTalker wrote: post #34

Earlier quoted context omitted.

Yes, but you'll only do this once the luxury market is saturated. As long as you can sell more luxury homes that is what you are going to build.

Right, but there's only so many people in that market. The reason it never seems to be saturated is that building more homes in expensive areas is typically very restricted and difficult and time consuming to do, mostly due to local/state regulations.

Then it isn’t saturated.

Re: The Folk Economics of Housing

#97

Post by majormajor »

dkarl wrote: post #54
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…

NIMBYs actively target this misconception. "New housing is luxury housing." > eventually the price drops happen on the older, smaller homes at the bottom end of the market I'd be interested in how long "eventually" takes for single-family homes. I think for rental units it happens very quickly.

The land value gives a strong floor. And nearby development increases the land value even if it makes the state of the house itself look worse and worse.

Re: The Folk Economics of Housing

#98

Post by potato3732842 »

TulliusCicero wrote: post #29
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.

Developer is also a professional with experience/refinement so he knows the magic specs to make things, magic things to say in the emails to the bureaucrats, magic words to put on the applications to avoid getting fucked by a bunch of "you need a survey for this" and "you need an engineer for that" and "akshually since you've done this you need a new septic" type landmines that cost $1-20k individually the little guy is gonna run right into.

Re: The Folk Economics of Housing

#99

Post by taeric »

majormajor wrote: post #90

Nowhere in the US does it at the scale to make a serious long-term dent in prices. Nobody with enough money and exposure to large amounts of real-estate wants to kill the golden goose. Look at the post-Covid-migration build stories. Rents start to soften and development dramatically slows. Like Austin - https://austinmonitor.com/stories/2024/08/as-construction-sl... Or Denver - https://www.denverpost.com/2025/07/24/a…

This seems to be claiming something different, though? You are pointing at that development slows as prices go down. Which seems somewhat expected?

That is, adding supply lowers prices. And lowering price reduces potential profit such that fewer people will build. With fewer people building, prices should go up again.

Stated differently, thin margins reduce the number of people offering products in a market. Ironically, the main way to get more building is with bigger builders in that scenario.

Re: The Folk Economics of Housing

#100

Post by w10-1 »

Adding supply would only reduce prices if it was added at the average or below.

Even if the number of units increase, the price can actually go up.

The relative market power matters most. A developer with cheap bridge financing and a large portfolio of unsold units has every incentive to hold prices to set expectations, while buyers who are occupiers generally are compelled to buy in a certain time frame and location.

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