3 ms·

productive deployment of capital Right, and the economists argue a deflationary market makes capital scarce High housing costs are an incredibly unproductive

productive deployment of capital Right, and the economists argue a deflationary market makes capital scarce High housing costs are an incredibly unproductive use of capital Right; it seems desirable for housing costs to keep even pace with the rest of the market, and ideally stay close to depreciated replacement cost And even when computers were improving significantly every year and prices went down people on average still increased their buying of new computers. I still buy computers in the deflationary technology market, like everyone else. But because I am putting off purchases and cannot recoup my costs with a sale, I probably buy a lot less computing hardware than I would if, for example, improvements were still just as big but much less frequent. I'm not saying it would be better for the world if computers improved more slowly- but clearly market behavior would change.

asabjorn 9y ago
> Right; it seems desirable for housing costs to keep even pace with the rest of the market, and ideally stay close to depreciated replacement cost In markets where there is enough housing supply, do we see people change housing ownership more often? E.g. buy a bigger apartment when they get kids or downsize when they are empty nesters. In markets with enough housing supply, do we see higher expectations for housing being modernized and up to code instead of being resold with only cosmetic changes? E.g. most bay area housing is very drafty and energy inefficient since it was built in the 60s/70s.
- sliverstorm 9y ago
  I don't have a study, but I think you expect to see all the things you ask about. If there is enough housing supply, prices are reasonable and moving to a different house isn't a $2M transaction, it's $100k. Aside from other things this makes the finances easier- if the down payment is $200k, you must line up the purchase & sale. If the down payment is $10k, you can front that, and the purchase isn't 100% contingent on the sale. (purchase/sale contingencies sink a lot of home sales) Additionally shopping for a house is not a dog-eat-dog fight. If there is enough supply, you don't have to spend every dime of your income in a bidding cage match with other buyers, which leaves you with capital available for real repairs & renovations. Builders and private developers can buy the really crappy old houses for very low prices and knock the whole thing down and build new. Plus, in a market where appreciation is the prime determinant of value, and it's a major seller's market, why bother doing much renovation? It'll sell no matter how bad it is. My local market certainly shows all these things compared to California- but, who can say exactly how much of the state of the California housing market is due to Prop 13? P.S. Yeah, it's ironic how the Bay Area is this wealthy progressive metro, and yet so much of the housing stock is ancient, way behind code, and terribly energy inefficient.

asabjorn 9y ago

> Right; it seems desirable for housing costs to keep even pace with the rest of the market, and ideally stay close to depreciated replacement cost In markets where there is enough housing supply, do we see people change housing ownership more often? E.g. buy a bigger apartment when they get kids or downsize when they are empty nesters. In markets with enough housing supply, do we see higher expectations for housing being modernized and up to code instead of being resold with only cosmetic changes? E.g. most bay area housing is very drafty and energy inefficient since it was built in the 60s/70s.

sliverstorm 9y ago
I don't have a study, but I think you expect to see all the things you ask about. If there is enough housing supply, prices are reasonable and moving to a different house isn't a $2M transaction, it's $100k. Aside from other things this makes the finances easier- if the down payment is $200k, you must line up the purchase & sale. If the down payment is $10k, you can front that, and the purchase isn't 100% contingent on the sale. (purchase/sale contingencies sink a lot of home sales) Additionally shopping for a house is not a dog-eat-dog fight. If there is enough supply, you don't have to spend every dime of your income in a bidding cage match with other buyers, which leaves you with capital available for real repairs & renovations. Builders and private developers can buy the really crappy old houses for very low prices and knock the whole thing down and build new. Plus, in a market where appreciation is the prime determinant of value, and it's a major seller's market, why bother doing much renovation? It'll sell no matter how bad it is. My local market certainly shows all these things compared to California- but, who can say exactly how much of the state of the California housing market is due to Prop 13? P.S. Yeah, it's ironic how the Bay Area is this wealthy progressive metro, and yet so much of the housing stock is ancient, way behind code, and terribly energy inefficient.