3 ms·

> But in reality pricing is also dictated by: location, style, build quality, schools, and a hundred other factors. All of those factors though are considered

> But in reality pricing is also dictated by: location, style, build quality, schools, and a hundred other factors. All of those factors though are considered with respect to supply. If there are 11 homes and 10 buyers, then by necessity the prices for those homes must come down despite how good those homes are. > This can make housing more dense and it can gradually lead to more units on the market. Potentially you could eventually reach competition dynamics that depress pricing. You vastly overestimate the number of units that would need to be built to depress prices. Prices are set on the margin and a relatively small increase in supply (say 20% over 20 years which is quite feasible) can have a huge influence. Going from 10 buyers chasing 9 homes to 10 buyers chasing 11 homes changes the dynamics an incredible amount.

clairity 5y ago
that’s a very good point about pricing happening at the margin, but consider that housing isn’t nearly as fungible as laundry detergent, so there is still a fair bit of pricing friction in housing. that’s because the marginal pricing mechanism occurs at the sub-segment of truly comparable properties (that normalized measures like $/ft^2 can’t capture) not all properties in a locality.
cco 5y ago
> ...relatively small increase in supply (say 20% over 20 years which is quite feasible) can have a huge influence. I think your framing of that number is a bit wrong, we've been under building demand by orders of magnitude for 40 years. Getting the sort of increase that might make housing "affordable", e.g. housing at only 3-6x the median household income, would require construction on an impossibly massive scale over the next 20 years. To wit, the Sunset neighborhood in San Francisco has added 21 new homes since 2011. 12% of the city's land area has added just 21 new homes over the last decade. Generously 80 new residents of San Francisco, a city of over 750,000 people, have been added to 12% of the city's land area in a decade. The amount of politics, money, and boots on the ground construction necessary to make housing affordable in West Coast cities is out of reach in any "business as usual" scenario in my mind. We'll need a crisis, until then, the mountain will remain unmoved I think.

clairity 5y ago

that’s a very good point about pricing happening at the margin, but consider that housing isn’t nearly as fungible as laundry detergent, so there is still a fair bit of pricing friction in housing. that’s because the marginal pricing mechanism occurs at the sub-segment of truly comparable properties (that normalized measures like $/ft^2 can’t capture) not all properties in a locality.

cco 5y ago

> ...relatively small increase in supply (say 20% over 20 years which is quite feasible) can have a huge influence. I think your framing of that number is a bit wrong, we've been under building demand by orders of magnitude for 40 years. Getting the sort of increase that might make housing "affordable", e.g. housing at only 3-6x the median household income, would require construction on an impossibly massive scale over the next 20 years. To wit, the Sunset neighborhood in San Francisco has added 21 new homes since 2011. 12% of the city's land area has added just 21 new homes over the last decade. Generously 80 new residents of San Francisco, a city of over 750,000 people, have been added to 12% of the city's land area in a decade. The amount of politics, money, and boots on the ground construction necessary to make housing affordable in West Coast cities is out of reach in any "business as usual" scenario in my mind. We'll need a crisis, until then, the mountain will remain unmoved I think.