5 ms·

Not in the article and rarely discussed is the most powerful influence on the price of housing: lack of production. Prices are a function of demand and supply.

Not in the article and rarely discussed is the most powerful influence on the price of housing: lack of production. Prices are a function of demand and supply. Oddly, the article seems to just drive right past this as the author discusses the problems related to people having nowhere to go, specifically when mentioning that if they sell their home for a tidy profit, they don't actually profit because they now have to go compete for a house. For all the arguments in the article, the following proposition seems like a reasonable evaluation: if Silicon Valley residents woke up tomorrow morning and discovered 5,000,000 new homes on the market, would that be predicted to influence the price? Of course it would, and that impact would be that prices would immediately plummet. This is true because the housing we are talking about may also be called shelter, and the demand for shelter is highly inelastic. People will do a lot to maintain shelter, including going without many other consumer items, buying used vehicles and using them until they turn to dust, sharing housing, taking second jobs, etc. In effect, all of the things we seen the younger generations doing are all the things we can easily predict one to do in order to have shelter, though most are not aware of or otherwise unable to articulate these kinds of economic considerations. Supply was only marginally restricted until somewhere around the early 90s, when states, counties, and municipalities began placing wholesale moratoriums on housing construction*. I can remember in the 80s as child driving through San Jose and seeing large orchards that are all now suburban housing. Looking around the valley, there has been no other housing development anywhere near that size, yet the net job growth in absolute numbers is many times higher. Many of the valley central planners plan construction as if it's still 1980, where each residential unit has something like 3 bedrooms to be occupied by two adults and two children, but reality is more like 3-5 adults. The result is substantially higher traffic and inadequate services, notably in the grocery stores which I observed to never have enough parking spaces, long lines, and popular items frequently out of stock on the shelf. Long commutes to far away communities are another result, essentially the planners deciding that among the most efficient workforce on the planet must be the task of sitting in a car 3 hours every day, which commonly cuts into what would likely be a good night's sleep, making the workers yet less efficient. The lack of shelter problem cannot be solved through anything other than increased production of housing. It is not a price problem. Prices are just the method we use to inform us on the situation of supply and demand for a product. Older generations will fight this, tooth and nail, because much of their savings are wrapped inside of a product they are consuming. Younger generations, if they ever figure out what is going on, may become hostile to the other needs of older generations, which, in my opinion, is a far greater risk to the older generations than the loss of equity in their homes. This goes without having a discussion as to the immorality of forcing younger generations into conditions of economically-enforced cohabitation and homelessness purely so that older generations can enjoy the profit that comes with restricted supply on the assets they own. I suppose this was a long-winded way of stating that the article's title claim is wrong, because there will likely never be a "normal housing market" short of some sort of large scale coordinated effort to substantially loosen or eliminate restrictions on construction. * Especially in California, housing construction is largely limited in absolute number of "new residential units" (NRUs), which is different than the popular understanding of increased difficulty in approval of design (the latter exists, and has for a long time, but it is not as significant as absolute restriction).

lotsofpulp 5y ago
> : if Silicon Valley residents woke up tomorrow morning and discovered 5,000,000 new homes on the market, would that be predicted to influence the price? Of course it would, and that impact would be that prices would immediately plummet. It might also plummet because quality of life would go down as resources that cannot be replicated have to be divided amongst many more people. Same as tourist hotspots. Why would people already living there want more crowded trails, ski slopes, and beaches?
- paulnpace 5y ago
  You are taking out of context a slice of my entire argument, which includes the fact that the resources are already being consumed. The people are already living there. The choice of an outrageously high number of homes in the example is purely to demonstrate that the fallacious claim of housing just mysteriously increasing in price without any visible cause, often presented as some magical force within the universe. It is, in fact, not possible to have such a scenario because such a construction project would require a lot of planning, so prices would actually begin to fall once the plans are put into place, likely reducing the overall number of units constructed as developers abandon plans, and the ultimate "clearing" price will drop to within some more reasonable bounds than the current price reflects.
  - lotsofpulp 5y ago
    Sorry, I did not mean to imply that I disagree with your post. Rather, I was trying to provide context for why existing land owners are incentivized to vote for restrictions on new construction, or even restrictions on higher density construction. You are right that there is no normal. The US in the 1900s, especially western US, was probably a right place in the right time event where the parameters of the environment allowed for that number of humans to live at a certain quality of life, and the parameters have changed now that there are billions of more people in the world.
    - paulnpace 5y ago
      > You are right that there is no normal. The US in the 1900s, especially western US, was probably a right place in the right time event where the parameters of the environment allowed for that number of humans to live at a certain quality of life, and the parameters have changed now that there are billions of more people in the world, and probably tens or maybe even a hundred million more competitors. There is a normal, and it is to allow housing to be constructed as desired. The whole number of people on the planet is not relevant. For example, if the same regulations had existed for centuries before, there would be no metropolises today, because all construction has been constricted, to include the formation of a new metropolis. Take a look at some place like New York city in Google Maps, then look at San Jose, California. notice that San Jose has somewhere close to 1000 square miles of undeveloped land surrounding it. In fact, if you drive to San Jose going north on 101, the "Entering San Jose" sign is in the middle of nowhere and IIRC, you can't see anything resembling civilization other than the eroded star-thistle-saturated brown hills (they claim this is for "preservation" as if that is what things looked like before being settled). I have been through this issue for myself many times in considering where I live, because I was always just behind the curve in Silicon Valley, so I left, as the minimum wage to live what I consider a normal American life is now $150k in that region, with housing ownership starting salary at $250k, which is ludicrous. You have to work this back completely: at some point, there were no people. Then someone arrived and decided they would like to construct shelter for themselves in the form of a house atop some soil. Then more people arrived, and they decided to do the same thing. We arrive at the 1990s, and many people have this: shelter atop some soil. Philosophically, you cannot justify someone who has shelter atop soil being granted the privilege of owning the shelter over someone who would like to construct shelter atop their soil, other than to say they have greater rights than the other, which presents a rather different picture: the establishment of a caste system which also works to enrich those who already own shelter. Thus, the scenario today is the older generations directly profiting from the impoverishment of the younger generations. I call this a great moral conundrum, and what is difficult about it is the older generations are in no way motivated to ever address this conundrum. They can live out their entire lives profiting from this highly immoral scenario, and not even think about it. It is why I believe that land owners in California and elsewhere with similar policies are among the most immoral people in modern history.

lotsofpulp 5y ago

> : if Silicon Valley residents woke up tomorrow morning and discovered 5,000,000 new homes on the market, would that be predicted to influence the price? Of course it would, and that impact would be that prices would immediately plummet. It might also plummet because quality of life would go down as resources that cannot be replicated have to be divided amongst many more people. Same as tourist hotspots. Why would people already living there want more crowded trails, ski slopes, and beaches?

paulnpace 5y ago
You are taking out of context a slice of my entire argument, which includes the fact that the resources are already being consumed. The people are already living there. The choice of an outrageously high number of homes in the example is purely to demonstrate that the fallacious claim of housing just mysteriously increasing in price without any visible cause, often presented as some magical force within the universe. It is, in fact, not possible to have such a scenario because such a construction project would require a lot of planning, so prices would actually begin to fall once the plans are put into place, likely reducing the overall number of units constructed as developers abandon plans, and the ultimate "clearing" price will drop to within some more reasonable bounds than the current price reflects.
- lotsofpulp 5y ago
  Sorry, I did not mean to imply that I disagree with your post. Rather, I was trying to provide context for why existing land owners are incentivized to vote for restrictions on new construction, or even restrictions on higher density construction. You are right that there is no normal. The US in the 1900s, especially western US, was probably a right place in the right time event where the parameters of the environment allowed for that number of humans to live at a certain quality of life, and the parameters have changed now that there are billions of more people in the world.
  - paulnpace 5y ago
    > You are right that there is no normal. The US in the 1900s, especially western US, was probably a right place in the right time event where the parameters of the environment allowed for that number of humans to live at a certain quality of life, and the parameters have changed now that there are billions of more people in the world, and probably tens or maybe even a hundred million more competitors. There is a normal, and it is to allow housing to be constructed as desired. The whole number of people on the planet is not relevant. For example, if the same regulations had existed for centuries before, there would be no metropolises today, because all construction has been constricted, to include the formation of a new metropolis. Take a look at some place like New York city in Google Maps, then look at San Jose, California. notice that San Jose has somewhere close to 1000 square miles of undeveloped land surrounding it. In fact, if you drive to San Jose going north on 101, the "Entering San Jose" sign is in the middle of nowhere and IIRC, you can't see anything resembling civilization other than the eroded star-thistle-saturated brown hills (they claim this is for "preservation" as if that is what things looked like before being settled). I have been through this issue for myself many times in considering where I live, because I was always just behind the curve in Silicon Valley, so I left, as the minimum wage to live what I consider a normal American life is now $150k in that region, with housing ownership starting salary at $250k, which is ludicrous. You have to work this back completely: at some point, there were no people. Then someone arrived and decided they would like to construct shelter for themselves in the form of a house atop some soil. Then more people arrived, and they decided to do the same thing. We arrive at the 1990s, and many people have this: shelter atop some soil. Philosophically, you cannot justify someone who has shelter atop soil being granted the privilege of owning the shelter over someone who would like to construct shelter atop their soil, other than to say they have greater rights than the other, which presents a rather different picture: the establishment of a caste system which also works to enrich those who already own shelter. Thus, the scenario today is the older generations directly profiting from the impoverishment of the younger generations. I call this a great moral conundrum, and what is difficult about it is the older generations are in no way motivated to ever address this conundrum. They can live out their entire lives profiting from this highly immoral scenario, and not even think about it. It is why I believe that land owners in California and elsewhere with similar policies are among the most immoral people in modern history.