7 ms·

From the article: >> "...historically low inventory" >> "...many sellers are sitting this year out." >> "...The median sale price ... fell by 1.8 percent..."

by avn2109 11y ago

From the article: >> "...historically low inventory" >> "...many sellers are sitting this year out." >> "...The median sale price ... fell by 1.8 percent..." The article's authors are confused. Their explanation for falling prices consists entirely of "Supply is down." That's exactly the opposite of how supply, demand, and prices are related. If they wanted to claim that low prices are scaring sellers out of the market, since those sellers are hoping for a future rebound in prices, I might believe it. But the article claims the causality is going the other way.

rspeer 11y ago
In Cambridge, a faction of candidates for city council promises that they will make housing affordable by opposing the construction of new housing. Apparently you can just tell people that supply and demand work the opposite way in the housing market, and people will believe you.
- home_boi 11y ago
  The reasoning might be that if a place gets luxury apartments, rich people will flood the area. Then the crime rate per capita goes down. The criminal population becomes diluted. It starts a snowball effect where crappy apartments in the area looks more and more attractive to the upper middle class as more upper middle class outbid previous poorer renters for the old housing.
  - rspeer 11y ago
    I know that's the argument, but it doesn't make much sense to me. It's comparing to a fictitious alternative where rich people don't move in. Why wouldn't they? It's already a desirable place to live, so rich people desire it too, and by definition they can afford to act on that desire. It is not hard for a rich person to outbid a poorer renter. I mean, this doesn't require a complicated explanation. Whether or not there's new housing, rich people can already outbid current renters because they have more money. And when this happens without new housing, not only does a rich person move in, someone else moves out. By trying to prevent gentrification from indirectly causing displacement, you just cause the displacement right away. This still sounds like supply and demand doing what one would expect, not doing the opposite.
- mtanski 11y ago
  This is a phenomenon that's not unique to Cambridge. In many places around the country NIBY forces convinced people that if they don't build new housing neighborhoods will stay (or become affordable) because there won't be new people moving in. At least that's the logic. This kind of line of reasoning is happening in East New York (far east neighborhood in BK). The local population / community board / local city council people were protesting re-zoning currently mostly industrial stretch of land. But it looks like the rezoning got pushed through. If it didn't happen folks who no longer had money for the spaces they wanted in eastern Bedstuy & Bushwich already have started pushing more eastward into East New York / Cypress hill area. This can be evidences by the increase in housing prices in those area in the last few years and number of new smaller buildings and gut renos happening.
gmarx 11y ago
I too found many of the facts stated difficult to relate. Every listing results in a bidding war-> prices are finally coming down?
smitherfield 11y ago
With very illiquid assets, like San Francisco real estate, it's often not so much how high or low prices are but whether the market even exists.
- Domenic_S 11y ago
  Indeed, but supply & demand says that less inventory in an otherwise normally-operating market should see prices increase. Yet, price-to-list is < 100%. It's hard to know what that means. Are sellers pricing the low-inventory situation into their list price and then only getting a fraction of that markup? Does the inventory suck, meaning lenders won't even finance it, thus reducing the price? Are all-cash offers at the $1mm+ price point so tempting that sellers are giving up 8%? Are buyers just giving up?
ASinclair 11y ago
> That's exactly the opposite of how supply, demand, and prices are related. Just add in a dash of human behavioral economics. There's a pretty strong narrative that the process of buying in the Bay Area is intense and demoralizing. There's only one winner in each of these bidding wars and many losers. At some point the losers may get fed up and stop looking. They'll also tell their friends and family how awful it was to look for a place. Note, this is all speculation on my part. I am nowhere near an Economist just someone living in this depressing home/rental market.
qq66 11y ago
Well, the housing market behaves in extremely irrational ways because the decisions have so much impact on people's lives. It doesn't behave like the market for tomatoes or aluminum.

by avn2109 11y ago

rspeer 11y ago

In Cambridge, a faction of candidates for city council promises that they will make housing affordable by opposing the construction of new housing. Apparently you can just tell people that supply and demand work the opposite way in the housing market, and people will believe you.

home_boi 11y ago
The reasoning might be that if a place gets luxury apartments, rich people will flood the area. Then the crime rate per capita goes down. The criminal population becomes diluted. It starts a snowball effect where crappy apartments in the area looks more and more attractive to the upper middle class as more upper middle class outbid previous poorer renters for the old housing.
- rspeer 11y ago
  I know that's the argument, but it doesn't make much sense to me. It's comparing to a fictitious alternative where rich people don't move in. Why wouldn't they? It's already a desirable place to live, so rich people desire it too, and by definition they can afford to act on that desire. It is not hard for a rich person to outbid a poorer renter. I mean, this doesn't require a complicated explanation. Whether or not there's new housing, rich people can already outbid current renters because they have more money. And when this happens without new housing, not only does a rich person move in, someone else moves out. By trying to prevent gentrification from indirectly causing displacement, you just cause the displacement right away. This still sounds like supply and demand doing what one would expect, not doing the opposite.
mtanski 11y ago
This is a phenomenon that's not unique to Cambridge. In many places around the country NIBY forces convinced people that if they don't build new housing neighborhoods will stay (or become affordable) because there won't be new people moving in. At least that's the logic. This kind of line of reasoning is happening in East New York (far east neighborhood in BK). The local population / community board / local city council people were protesting re-zoning currently mostly industrial stretch of land. But it looks like the rezoning got pushed through. If it didn't happen folks who no longer had money for the spaces they wanted in eastern Bedstuy & Bushwich already have started pushing more eastward into East New York / Cypress hill area. This can be evidences by the increase in housing prices in those area in the last few years and number of new smaller buildings and gut renos happening.

gmarx 11y ago

I too found many of the facts stated difficult to relate. Every listing results in a bidding war-> prices are finally coming down?

smitherfield 11y ago

With very illiquid assets, like San Francisco real estate, it's often not so much how high or low prices are but whether the market even exists.

Domenic_S 11y ago
Indeed, but supply & demand says that less inventory in an otherwise normally-operating market should see prices increase. Yet, price-to-list is < 100%. It's hard to know what that means. Are sellers pricing the low-inventory situation into their list price and then only getting a fraction of that markup? Does the inventory suck, meaning lenders won't even finance it, thus reducing the price? Are all-cash offers at the $1mm+ price point so tempting that sellers are giving up 8%? Are buyers just giving up?

ASinclair 11y ago

> That's exactly the opposite of how supply, demand, and prices are related. Just add in a dash of human behavioral economics. There's a pretty strong narrative that the process of buying in the Bay Area is intense and demoralizing. There's only one winner in each of these bidding wars and many losers. At some point the losers may get fed up and stop looking. They'll also tell their friends and family how awful it was to look for a place. Note, this is all speculation on my part. I am nowhere near an Economist just someone living in this depressing home/rental market.

qq66 11y ago

Well, the housing market behaves in extremely irrational ways because the decisions have so much impact on people's lives. It doesn't behave like the market for tomatoes or aluminum.