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The idea that housing always goes up in price is nonsense so you’d be right to be skeptical of “get in now” urges. If anybody said that about stocks they’d go t
by ebikelaw 9y ago
The idea that housing always goes up in price is nonsense so you’d be right to be skeptical of “get in now” urges. If anybody said that about stocks they’d go to jail but for some reason we don’t regulate marketing if housing-as-security the way we regulate actual securities.
The only reason housing prices are skyrocketing is because we’ve built a protective legal regime around incumbent land owners. The market can’t function so the price goes up. Just as an example I’d be very pleased to build a small stack of flats on my Oakland property, say four units, but the law doesn’t permit that. On my block there’s a 1938 building with 22 apartments on the same sized lot as mine. So we used to allow it, and clearly it’s within the character of the neighborhood, to borrow a phrase from the NIMBYs, but we’ve just outlawed that kind of building.
As soon as the regulatory environment gets fixed, supply is going to explode and prices will fall.
- usaar333 9y agoBut a lack of supply doesn't explain rents being comparatively flat over the past 2 years. The prices going up imply either: 1. Market has strong belief that housing construction will stop in the future (i..e regulatory environment actually worsens), leading to surge in rents. 2. Irrationality.
- conanbatt 9y agoThere are many reasons why rental and house price can diverge. More people living in the same space, a change in demographics, marginal tax rates. Markets have an irrational component, but seemingly irrational behavior is more often misunderstood rational behavior than the other way around.
- ebikelaw 9y agoI think you’re drawing conclusions that might not be warranted by this data. The rent survey is fundamentally different because it’s rents reported by large apartment management firms, not all private leases. We don’t really know what’s going on in the rent-a-house market. On the sales side the data is all recorded sales, which are public records.
- usaar333 9y agoWhich rent survey are you referencing? I'm going off https://www.zillow.com/santa-clara-county-ca/home-values/ https://www.zillow.com/santa-clara-county-ca/home-values/ which AFAIK uses all rent postings. FWIW, there's also intuition backing this. e.g. go to zillow and click on units for rent in Cupertino. And be shocked that their estimated purchase prices are ~40x yearly rent. (It's difficult for me to see how that just isn't irrational pricing)