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False. Housing is not an elastic "free" market. Houses are not fungible goods like bolts or eggs. https://blogs.cfainstitute.org/investor/2017/03/27/where-mark

False. Housing is not an elastic "free" market. Houses are not fungible goods like bolts or eggs. https://blogs.cfainstitute.org/investor/2017/03/27/where-markets-fail-markets-assume-fungibility/ https://blogs.cfainstitute.org/investor/2017/03/27/where-mar...

goodpoint 5y ago
Why the silent downvotes? This is the most basic economy 101.
- harryh 5y ago
  Because housing isn’t completely in-fungible either. So, while there might be irregularities here and there, increasing supply will in fact put downward pressure on prices.
  - goodpoint 5y ago
    I never said it's completely non-fungible. Clearly I struck a nerve here.
    - harryh 5y ago
      But you did say that it was "False" that additional supply would put competitive pressure on housing prices.
    - dredmorbius 5y ago
      You kind of did precisely just that in your response to my comment here: https://news.ycombinator.com/item?id=28585422 https://news.ycombinator.com/item?id=28585422 You're grossly overstating constraints and the absolute and relative quantities of housing which must be added.
ryan93 5y ago
Are you claiming that if America's housing supply literally doubled overnight prices wouldn't change?
- goodpoint 5y ago
  No, I just said that it's not an elastic market. Powerful entities like large investment funds can easily corner the market and push the prices up, which is exactly what happened in many cities across the world. Of course if the supply "literally doubled overnight" or pigs started to fly the prices would go down. For a number of years.
dredmorbius 5y ago
Technically, it's land that's not a fungible good. Housing (and other construction) is. The key though is to tax the unimproved land value to make low-density, low-intensity utilisation (and unimproved holdings) economically nonviable.
- dredmorbius 5y ago
  (Other than that quibble, I'm agreeing with the point.)
- goodpoint 5y ago
  No, land is not fungible but also the volumes occupied over land are not fungible. You cannot simply build vertically indefinitely and/or at almost-linear cost. There are a million constraints. Not to mention the geographic limitations of the market. You cannot buy a house or land in a cheaper country/city and teleport it to your city. Relocating comes with all sort of burdens, from getting visas to leaving friends/partners/family/job behind, to language barrier. All of this makes housing extremely non-fungible. Finally, people in need of housing are under extreme pressure not to be homeless, while those who own 20 apartments can easily keep 1 unoccupied if that means pushing up the market value of all apartments in the long term. This asymmetry is what makes the market speculative and exploitative.
  - dredmorbius 5y ago
    There are several factors at play: - The bias against sufficient provisioning exists regardless of scale or growth rates. Housing tends to be underprovisioned when it serves as an asset, whether at the individual or institutional scales. - Infinite expansion of housing stock isn't necessary. In mostt cases only a small fraction of existing housing stock need be added. California has a homeless population of roughly 170,000 (https://www.usich.gov/homelessness-statistics/ca/ https://www.usich.gov/homelessness-statistics/ca/) on a given night. That's a large number, yes. It's also less than 1/2 of one percent of the total population of the state. The incremental housing need is small. It's localised. Those constraints of which you write will not be even remotely approached in addressing the housing needs of even 10x or 100x this number of people. Adding a small amount of additional housing at affordable rates in high-demand markets will address the housing problem nearly completely. (There may also be some additional services for the addicted, mentally ill, disabled, elderly, and young. That's independent of the housing issue itself.) But adding a few percent to the housing stock will have an immense impact on the very thin trade of that asset, plunging prices, and hence household and family wealth, as well as real estate, mortgage, bank, and financial derivative asset values. Given the utter dismanteling of defined-benefit pensions and the importance of real estate appreciation to family retirement planning, and the role of the financial sector in politics, the resultant political pressure is immense. That covers your first two points. For your fourth: yes, I fundamentally agree, that's what I just argued above, and it's a core aspect of the present homelessness crisis. Given that landlords can also drive evictions at will (effectively creating demand), the market is further unbalanced. The geographic structure of the market is a non-issue when present low densities and low marginal change requirements (as discussed above) are factored in. SF Bay Area housing demand could be addressed with improved transit, increased densities, and stronger tenant protections with only modest increases in total housing stock.

goodpoint 5y ago

Why the silent downvotes? This is the most basic economy 101.

harryh 5y ago
Because housing isn’t completely in-fungible either. So, while there might be irregularities here and there, increasing supply will in fact put downward pressure on prices.
- goodpoint 5y ago
  I never said it's completely non-fungible. Clearly I struck a nerve here.
  - harryh 5y ago
    But you did say that it was "False" that additional supply would put competitive pressure on housing prices.
  - dredmorbius 5y ago
    You kind of did precisely just that in your response to my comment here: https://news.ycombinator.com/item?id=28585422 https://news.ycombinator.com/item?id=28585422 You're grossly overstating constraints and the absolute and relative quantities of housing which must be added.

ryan93 5y ago

Are you claiming that if America's housing supply literally doubled overnight prices wouldn't change?

goodpoint 5y ago
No, I just said that it's not an elastic market. Powerful entities like large investment funds can easily corner the market and push the prices up, which is exactly what happened in many cities across the world. Of course if the supply "literally doubled overnight" or pigs started to fly the prices would go down. For a number of years.

dredmorbius 5y ago

Technically, it's land that's not a fungible good. Housing (and other construction) is. The key though is to tax the unimproved land value to make low-density, low-intensity utilisation (and unimproved holdings) economically nonviable.

dredmorbius 5y ago
(Other than that quibble, I'm agreeing with the point.)
goodpoint 5y ago
No, land is not fungible but also the volumes occupied over land are not fungible. You cannot simply build vertically indefinitely and/or at almost-linear cost. There are a million constraints. Not to mention the geographic limitations of the market. You cannot buy a house or land in a cheaper country/city and teleport it to your city. Relocating comes with all sort of burdens, from getting visas to leaving friends/partners/family/job behind, to language barrier. All of this makes housing extremely non-fungible. Finally, people in need of housing are under extreme pressure not to be homeless, while those who own 20 apartments can easily keep 1 unoccupied if that means pushing up the market value of all apartments in the long term. This asymmetry is what makes the market speculative and exploitative.
- dredmorbius 5y ago
  There are several factors at play: - The bias against sufficient provisioning exists regardless of scale or growth rates. Housing tends to be underprovisioned when it serves as an asset, whether at the individual or institutional scales. - Infinite expansion of housing stock isn't necessary. In mostt cases only a small fraction of existing housing stock need be added. California has a homeless population of roughly 170,000 (https://www.usich.gov/homelessness-statistics/ca/ https://www.usich.gov/homelessness-statistics/ca/) on a given night. That's a large number, yes. It's also less than 1/2 of one percent of the total population of the state. The incremental housing need is small. It's localised. Those constraints of which you write will not be even remotely approached in addressing the housing needs of even 10x or 100x this number of people. Adding a small amount of additional housing at affordable rates in high-demand markets will address the housing problem nearly completely. (There may also be some additional services for the addicted, mentally ill, disabled, elderly, and young. That's independent of the housing issue itself.) But adding a few percent to the housing stock will have an immense impact on the very thin trade of that asset, plunging prices, and hence household and family wealth, as well as real estate, mortgage, bank, and financial derivative asset values. Given the utter dismanteling of defined-benefit pensions and the importance of real estate appreciation to family retirement planning, and the role of the financial sector in politics, the resultant political pressure is immense. That covers your first two points. For your fourth: yes, I fundamentally agree, that's what I just argued above, and it's a core aspect of the present homelessness crisis. Given that landlords can also drive evictions at will (effectively creating demand), the market is further unbalanced. The geographic structure of the market is a non-issue when present low densities and low marginal change requirements (as discussed above) are factored in. SF Bay Area housing demand could be addressed with improved transit, increased densities, and stronger tenant protections with only modest increases in total housing stock.