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"The number of new rich people created by IPOs is a minority of the aggregate demand for housing. " 1) A lot of new employees who make 1-2 millions (maybe not

"The number of new rich people created by IPOs is a minority of the aggregate demand for housing. " 1) A lot of new employees who make 1-2 millions (maybe not rich, but 'some money') means more demand on housing prices. 2) It does not take a lot to keep the bubble going. Less than 2% of the buyers, if they are 'price inelastic' (i.e. they'll pay whatever the asking price is) is enough to keep a bubble going. This happened in Vancouver - as soon as foreign buyers paused due to new taxes, prices fluxed quickly. They don't represent a large chunk of the buyers.

huac 10y ago
Basically that the median housing price is a function of the marginal propensity to purchase? Can't help but wonder how true that is.
- edblarney 10y ago
  I believe it's true because regular participants in buying/selling are all taking cues from 'what goes on around them'. If 95% of them are looking around, and 5% are just buying 'at whatever price' - those people will drive pricing. When 'the house down the street' sells for 10% above asking, it validates all the homes sales in that environment, and gives confidence to the regular buyers that their investment is sound. If there is ever a hint of a plateau, all it takes is for a few price-inelastic buyers to come along and 'validate' prices. Then some buy on that basis, and the pricing cue percolates through the system. Once those people leave the market - there's no strong validation going on - and a small whiff of lack of price movement can put a chill on things, then prices can start to fall. Once they start to fall - it's a negative signal, wallets clam up. Without a rich buyer to restore confidence ... the spiral continues. It'd be an interesting model :)
  - toomuchtodo 10y ago
    My uncle is a Realtor, and I built the software for his one man operation (sales funnel, analytics, etc). If you want to see when those price inelastic momentum makers have left the market, watch the trailing 10, 30 day listing to sales price ratio. 10 day trailing gives you a hint, but it should be clear as day after 30 days when you see inventory selling consistently below asking.
    - edblarney 10y ago
      That's cool. FYI - Vancouver announced a major tax on foreign purchases, which did hit the market hard. The claim was that 'foreign buyers' were not driving up prices, but clearly they were. And the tax didn't even imply that all foreign purchases dried up, just that some would have, and the price-point of their purchase decision would have changed somewhat.
      - deleted 10y ago
        [deleted]

huac 10y ago

Basically that the median housing price is a function of the marginal propensity to purchase? Can't help but wonder how true that is.

edblarney 10y ago
I believe it's true because regular participants in buying/selling are all taking cues from 'what goes on around them'. If 95% of them are looking around, and 5% are just buying 'at whatever price' - those people will drive pricing. When 'the house down the street' sells for 10% above asking, it validates all the homes sales in that environment, and gives confidence to the regular buyers that their investment is sound. If there is ever a hint of a plateau, all it takes is for a few price-inelastic buyers to come along and 'validate' prices. Then some buy on that basis, and the pricing cue percolates through the system. Once those people leave the market - there's no strong validation going on - and a small whiff of lack of price movement can put a chill on things, then prices can start to fall. Once they start to fall - it's a negative signal, wallets clam up. Without a rich buyer to restore confidence ... the spiral continues. It'd be an interesting model :)
- toomuchtodo 10y ago
  My uncle is a Realtor, and I built the software for his one man operation (sales funnel, analytics, etc). If you want to see when those price inelastic momentum makers have left the market, watch the trailing 10, 30 day listing to sales price ratio. 10 day trailing gives you a hint, but it should be clear as day after 30 days when you see inventory selling consistently below asking.
  - edblarney 10y ago
    That's cool. FYI - Vancouver announced a major tax on foreign purchases, which did hit the market hard. The claim was that 'foreign buyers' were not driving up prices, but clearly they were. And the tax didn't even imply that all foreign purchases dried up, just that some would have, and the price-point of their purchase decision would have changed somewhat.
    - deleted 10y ago
      [deleted]