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I’ve never seen any data showing that housing bubbles are attributed to “the rich”. The housing market is made of tens of millions of individual home owners, no

I’ve never seen any data showing that housing bubbles are attributed to “the rich”. The housing market is made of tens of millions of individual home owners, not some moguls cornering the market.

jandrese 5y ago
The term you want to look for is "investment properties", or in some cases "foreign investment".
- flyinglizard 5y ago
  “Rich people” investment properties are a negligible share of the total housing market so this theory most often used as a scapegoat by the “eat the rich” crowd. If anything, more real estate investment would create more housing stock. Someone’s not building enough.
  - munk-a 5y ago
    I don't actually think new housing developments are a really high RoR and building your own house has a high barrier of being able to support and house yourself while floating the full value of the house you're trying to build - for that reason new home owners almost never buy their own house. Additionally arguably the most valuable part of owning a home is the appreciating value of land - and land most steadily appreciates in stable communities (where a plant closure won't suddenly tank the market) and the best of these are urban centers where the market is extremely stable. All that is a long way to say that investors specifically want to buy that condo that's right next to your office and they're much less interested in investing in some development out in the boonies that will only gradually accrue value (and be impossible to exit for the year or so that the units are actually under construction). Lastly, we've got NIMBY - this is the source of nearly all our housing woes because if you could buy up all those single homes in SF and convert them to condo towers we'd solve the housing crisis overnight - but that would "ruin the neighborhood" and, more importantly, depreciate the value of all those inflated house prices - and that's why all the neighborhood councils will continuously vote to perpetuate the shortage of housing. People do want to build more housing - but people who own the land are stubborn assholes. When it happens that an investor manages to secure a full block of single family homes in a downtown core they'll almost always try and convert it to condos - but then they've got to fight against the NIMBYism and they'll usually lose because as every 80's movie ever taught us: "The evil developer is trying to tear down the community center - we've got to stick up for the neighborhood and win that tournament!"
pishpash 5y ago
Leveraged asset buyers have an influence when inventory is so low.
- epistasis 5y ago
  Agreed, but the fundamental problem is that inventory is so low. Super low inventory and vacancy rates cause far more problems in addition to prices being set by a wealthier percentile.
  - flyinglizard 5y ago
    Ironically the inventory would have been higher if more rich people invested in real estate projects, instead of stocks and bonds.
    - epistasis 5y ago
      I don't think the bottleneck for new housing is investment capital, it's mostly about getting permitted to build, and also getting enough labor. There's a fairly big shortage in the trades, as the boom-bust-cycle has forced more experienced people out, and there hasn't been many new people getting trained. Also, a lot of the opportunity for large scale projects is gone; building a large tract of homes in the Bay Area means building super-exurban in places like Tracy. Projects like the Vallco mall replacement in Cupertino take a decade+, and what ends up getting permitted will not usually look anything like the initial plans, or what's technically allowed by law. (This is changing slightly in California in that by adding enough below-market-rate deed restricted units, you can build according to code and zoning without greedy neighbors vetoing the project. )
munk-a 5y ago
It might be helpful to take a deeper look at the housing markets of Toronto and Vancouver - both are urban centers with a lot of employment opportunities and homes owned by regular folks - but they've also both been ravaged by a plethora of investment properties which, in a self-fulfilling manner, are driving demand through the roof thus justifying more investment.
- flyinglizard 5y ago
  If you asked me what keeps NYC real estate prices up, I'd say "rich people", but the dynamics of distinctive urban centers such as Toronto, London, San Francisco and others don't apply at all on a country level. It's not the same types of assets, buyers or price levels. So yes Toronto might have been influenced by rich Chinese buying properties, but does that extend to Canada as a whole?

jandrese 5y ago

The term you want to look for is "investment properties", or in some cases "foreign investment".

flyinglizard 5y ago
“Rich people” investment properties are a negligible share of the total housing market so this theory most often used as a scapegoat by the “eat the rich” crowd. If anything, more real estate investment would create more housing stock. Someone’s not building enough.
- munk-a 5y ago
  I don't actually think new housing developments are a really high RoR and building your own house has a high barrier of being able to support and house yourself while floating the full value of the house you're trying to build - for that reason new home owners almost never buy their own house. Additionally arguably the most valuable part of owning a home is the appreciating value of land - and land most steadily appreciates in stable communities (where a plant closure won't suddenly tank the market) and the best of these are urban centers where the market is extremely stable. All that is a long way to say that investors specifically want to buy that condo that's right next to your office and they're much less interested in investing in some development out in the boonies that will only gradually accrue value (and be impossible to exit for the year or so that the units are actually under construction). Lastly, we've got NIMBY - this is the source of nearly all our housing woes because if you could buy up all those single homes in SF and convert them to condo towers we'd solve the housing crisis overnight - but that would "ruin the neighborhood" and, more importantly, depreciate the value of all those inflated house prices - and that's why all the neighborhood councils will continuously vote to perpetuate the shortage of housing. People do want to build more housing - but people who own the land are stubborn assholes. When it happens that an investor manages to secure a full block of single family homes in a downtown core they'll almost always try and convert it to condos - but then they've got to fight against the NIMBYism and they'll usually lose because as every 80's movie ever taught us: "The evil developer is trying to tear down the community center - we've got to stick up for the neighborhood and win that tournament!"

pishpash 5y ago

Leveraged asset buyers have an influence when inventory is so low.

epistasis 5y ago
Agreed, but the fundamental problem is that inventory is so low. Super low inventory and vacancy rates cause far more problems in addition to prices being set by a wealthier percentile.
- flyinglizard 5y ago
  Ironically the inventory would have been higher if more rich people invested in real estate projects, instead of stocks and bonds.
  - epistasis 5y ago
    I don't think the bottleneck for new housing is investment capital, it's mostly about getting permitted to build, and also getting enough labor. There's a fairly big shortage in the trades, as the boom-bust-cycle has forced more experienced people out, and there hasn't been many new people getting trained. Also, a lot of the opportunity for large scale projects is gone; building a large tract of homes in the Bay Area means building super-exurban in places like Tracy. Projects like the Vallco mall replacement in Cupertino take a decade+, and what ends up getting permitted will not usually look anything like the initial plans, or what's technically allowed by law. (This is changing slightly in California in that by adding enough below-market-rate deed restricted units, you can build according to code and zoning without greedy neighbors vetoing the project. )

munk-a 5y ago

It might be helpful to take a deeper look at the housing markets of Toronto and Vancouver - both are urban centers with a lot of employment opportunities and homes owned by regular folks - but they've also both been ravaged by a plethora of investment properties which, in a self-fulfilling manner, are driving demand through the roof thus justifying more investment.

flyinglizard 5y ago
If you asked me what keeps NYC real estate prices up, I'd say "rich people", but the dynamics of distinctive urban centers such as Toronto, London, San Francisco and others don't apply at all on a country level. It's not the same types of assets, buyers or price levels. So yes Toronto might have been influenced by rich Chinese buying properties, but does that extend to Canada as a whole?