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>>But how is this at all related to the secondary market speculators? Speculators inject capital into the real estate market. They often bring outside capital

>>But how is this at all related to the secondary market speculators? Speculators inject capital into the real estate market. They often bring outside capital into it, and then keep it in the real estate market instead of taking it out. Housing prices are simply a matter of the interplay between the supply of capital interested in housing, and the supply of housing, i.e. supply and demand in housing, and more speculators pushes up the demand side of the equation, leading to higher prices. In fact, that's what the critics of real estate speculation always point to as to why it should be discouraged: they push up prices (which is a bit simplistic: the increase in prices in multi-dwelling units is temporary as long as zoning doesn't prevent developers from building more dense developments. Only the price increase in single family homes is permanent). What the critics miss is that rising prices is what funds supply expansion. Ceteris paribus, a market with more speculators will have higher SFH prices, more units, and lower rental rates, and rent is the true cost of housing (the purchase price is the cost of investing in housing).

nobodyandproud 5y ago
Injecting capital doesn’t magically increase the supply of real estate. If my goal is to hold on to a single family house and sell it for a profit later as is or with just some touch-ups, it’s still a single family residence. The speculation just increased the cost of the land. If my goal is to tear down the single family home and replace it with a two-family home or a small apartment; that increases the supply. Both involve speculators, but only the latter increases the supply. Why shouldn’t policy discourage the former—a market inefficiency, but a very sane local maxima—and encourage the latter?
- CryptoPunk 5y ago
  >>Injecting capital doesn’t magically increase the supply of real estate. It's not magic. It reliably increases supply by raising the return on investment from building new units, and thus increasing the number of potential projects which find investors. >>Both involve speculators, but only the latter increases the supply. Why shouldn’t policy discourage the former—a market inefficiency, but a very sane local maxima—and encourage the latter? I fully support encouraging the latter and discouraging the former. I would support utilizing a land tax to discourage, and eminent domain to outright prevent, the former.
  - nobodyandproud 5y ago
    Then you’re taking the same position I am.

nobodyandproud 5y ago

Injecting capital doesn’t magically increase the supply of real estate. If my goal is to hold on to a single family house and sell it for a profit later as is or with just some touch-ups, it’s still a single family residence. The speculation just increased the cost of the land. If my goal is to tear down the single family home and replace it with a two-family home or a small apartment; that increases the supply. Both involve speculators, but only the latter increases the supply. Why shouldn’t policy discourage the former—a market inefficiency, but a very sane local maxima—and encourage the latter?

CryptoPunk 5y ago
>>Injecting capital doesn’t magically increase the supply of real estate. It's not magic. It reliably increases supply by raising the return on investment from building new units, and thus increasing the number of potential projects which find investors. >>Both involve speculators, but only the latter increases the supply. Why shouldn’t policy discourage the former—a market inefficiency, but a very sane local maxima—and encourage the latter? I fully support encouraging the latter and discouraging the former. I would support utilizing a land tax to discourage, and eminent domain to outright prevent, the former.
- nobodyandproud 5y ago
  Then you’re taking the same position I am.