7 ms·

Paul Krugman described the effect memorably in 2005. https://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html https://www.nytimes.com/2005/08/08/opin

by sien 5y ago

Paul Krugman described the effect memorably in 2005. https://www.nytimes.com/2005/08/08/opinion/that-hissing-sound.html https://www.nytimes.com/2005/08/08/opinion/that-hissing-soun... "Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone. In Flatland, which occupies the middle of the country, it's easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can't even get started. But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions -- hence "zoned" -- makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles." Just ignore the first sentence in the article and the prognosis on a bubble popping messily.... Erdmann adds to the thesis in a very valuable way by pointing out that people move out Zoned zone to Phoenix and other US metros. Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ.

Andaith 5y ago
Which is crazy, because you would think that Australia was mostly Flatland! It's the size of the continental US, with a population lower than Texas. Everyone here lives in the capital cities, and last I looked there were almost no tech jobs at all further up the coast between Sydney and Brisbane. I wonder if pandemic working from home is going to change this, some of our devs have already moved up the coast...
- LinAGKar 5y ago
  Probably because it's mostly desert
  - rozenmd 5y ago
    It is, and yet we still only really live in three cities (150km in length along a 26000km long coastline)
    - dmurray 5y ago
      Three cities (presumably Sydney/Melbourne/Brisbane) is a weird way to describe Australia's population distribution. Perth is basically the same size as Brisbane. "We still only really live in two/four/five cities" all would be more accurate.
  - csee 5y ago
    No. The non-desert land per capita in Australia is more than twice that in the US.
    - sumedh 5y ago
      Its not just desert, it about water as well. If I not mistaken large parts of Australia had drought in the last couple of years.
  - loeg 5y ago
    So is California. And Texas.
- golemiprague 5y ago
  Flatland is a state of mind where the state government try not to interfere too much and people in general have a less nimby attitude, Australia is the opposite of it.
- Nursie 5y ago
  There used to be an IBM office in Gold Coast, many moons ago. No idea if it's still there. That stretch of coast has been seeing massive house price inflation recently as well, IIRC.
- olivermarks 5y ago
  In Cal it's an infrastructure issue - how to get roads and utilities (sewer, water, gas, electric) to relatively remote areas, how that is organized (incorporated/unincorporated areas) before even thinking about building structures
- hackerfromthefu 5y ago
  You can buy remote country houses for around 100k ..
- chrisjc 5y ago
  > some of our devs have already moved up the coast... How do they do this and stay connected? I remember seeing a guy that did this in a van while subscribing to multiple wireless providers. But as far as I am aware Australia still doesn't have the best coverage, service and technology. Moreover, if you're going out more remote locations, I'm sure your connection options start to dwindle. I'm sure Starlink (maybe oneweb too?) and the WFH movement is going to change this equation quite drastically.
  - gregors 5y ago
    Here's an interesting RV internet set up. https://wa9ace.net/2021/08/01/rv-internet.html https://wa9ace.net/2021/08/01/rv-internet.html
refurb 5y ago
This theory doesn’t work for one of the biggest bubbles of 2007, which was Las Vegas. It has nothing but surrounding land to build on. They built like crazy and still had massive price inflation followed by a bubble popping, prices dropped almost 50% and vast swathes of empty houses remained for years and prices only recovered to the peak in the last year or two.
- eurasiantiger 5y ago
  Money laundering explains Vegas and New York.
  - vl 5y ago
    But how exactly can you launder money through buying a house? If you buy, essentially you declare you have the money, thus question can be asked where you got it from.
    - hef19898 5y ago
      That seems to explain it rather good (not that I would be able to tell, but it real estate money laundering is problem): https://www.icij.org/investigations/fincen-files/a-kleptocrats-dream-us-real-estate-a-safe-haven-for-billions-in-dirty-money-report-says/ https://www.icij.org/investigations/fincen-files/a-kleptocra... That is an interesting bit from the lined article: "One of the biggest issues that the report cites is the use of geographic targeting orders as the U.S.’s primary tool to identify potential money laundering events. GTOs impose reporting requirements on real estate purchases, but only in narrowly targeted scenarios — large cash purchases by legal entities in specific geographic areas."
    - kccqzy 5y ago
      With a mortgage certainly the bank will ask where your down payment comes from. But do all-cash buyers really get asked where the money comes from?
      - heurisko 5y ago
greatpostman 5y ago
Paul krugman has been wrong on almost everything
- ta2234234242 5y ago
  When you win a nobel prize in economics, I will listen to you more.
  - carrolldunham 5y ago
    Hmm you might want to have a look into that particular "nobel prize" category
  - political12345 5y ago
    educate yourself https://en.m.wikipedia.org/wiki/Argument_from_authority https://en.m.wikipedia.org/wiki/Argument_from_authority
  - mannerheim 5y ago
    There is no such prize. There's a Sveriges Riksbank Prize in Memory of Alfred Nobel.
    - alasdair_ 5y ago
      To be fair, it's still a yearly prize, for economics, awarded by the same Nobel Foundation that awards the other prizes, under the same rules as the other prizes. The laureates are announced at the same time as the other laureates, the awards are presented in the same manner as the others and everyone shows up to the same Nobel Prize Awards Ceremony. And if we really want to go full pedant, the award isn't called anything in English at all, the real name is the "Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne" But pedantry is silly, right?
      - mannerheim 5y ago
        'Sveriges Riksbank Prize in Memory of Alfred Nobel' is more or less a literal translation of the Swedish name, minus the part about 'in economic science' and whether or not you feel like translating the name of the Swedish royal bank. Anyway, even the Nobel Foundation explicitly says it isn't a Nobel Prize: > Not a Nobel Prize > The prize in economic sciences is not a Nobel Prize. https://www.nobelprize.org/nomination/economic-sciences/ https://www.nobelprize.org/nomination/economic-sciences/
flukus 5y ago
> When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. And this is the driving force behind those cities going bankrupt, they're easy to build but not sustainable in the long term: https://www.youtube.com/watch?v=7Nw6qyyrTeI https://www.youtube.com/watch?v=7Nw6qyyrTeI
johnny_reilly 5y ago
> Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ. Ha! I see your "UK does not have flatlands" and I raise you Norfolk. V flat indeed
- KaiserPro 5y ago
  Oi think yew are mistakun boh. Narfuck dont have noe flatlands, oonlee the fens, en thas moostly linconshire boh. Noel Coward and his fucking quips. However, the fens is a sinking bog, so not great for building on, especially as its in the middle of fucking nowhere and 180 degrees of depressive grey most of the time. but but but, its a good quote.
nabla9 5y ago
In the Zoned Zone parents paying for their children's education in house prices was one reason for price increases (prices in areas with good public schools skyrocketed). The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke (2004) https://en.wikipedia.org/wiki/The_Two-Income_Trap https://en.wikipedia.org/wiki/The_Two-Income_Trap

by sien 5y ago

Andaith 5y ago

Which is crazy, because you would think that Australia was mostly Flatland! It's the size of the continental US, with a population lower than Texas. Everyone here lives in the capital cities, and last I looked there were almost no tech jobs at all further up the coast between Sydney and Brisbane. I wonder if pandemic working from home is going to change this, some of our devs have already moved up the coast...

LinAGKar 5y ago
Probably because it's mostly desert
- rozenmd 5y ago
  It is, and yet we still only really live in three cities (150km in length along a 26000km long coastline)
  - dmurray 5y ago
    Three cities (presumably Sydney/Melbourne/Brisbane) is a weird way to describe Australia's population distribution. Perth is basically the same size as Brisbane. "We still only really live in two/four/five cities" all would be more accurate.
- csee 5y ago
  No. The non-desert land per capita in Australia is more than twice that in the US.
  - sumedh 5y ago
    Its not just desert, it about water as well. If I not mistaken large parts of Australia had drought in the last couple of years.
- loeg 5y ago
  So is California. And Texas.
golemiprague 5y ago
Flatland is a state of mind where the state government try not to interfere too much and people in general have a less nimby attitude, Australia is the opposite of it.
Nursie 5y ago
There used to be an IBM office in Gold Coast, many moons ago. No idea if it's still there. That stretch of coast has been seeing massive house price inflation recently as well, IIRC.
olivermarks 5y ago
In Cal it's an infrastructure issue - how to get roads and utilities (sewer, water, gas, electric) to relatively remote areas, how that is organized (incorporated/unincorporated areas) before even thinking about building structures
hackerfromthefu 5y ago
You can buy remote country houses for around 100k ..
chrisjc 5y ago
> some of our devs have already moved up the coast... How do they do this and stay connected? I remember seeing a guy that did this in a van while subscribing to multiple wireless providers. But as far as I am aware Australia still doesn't have the best coverage, service and technology. Moreover, if you're going out more remote locations, I'm sure your connection options start to dwindle. I'm sure Starlink (maybe oneweb too?) and the WFH movement is going to change this equation quite drastically.
- gregors 5y ago
  Here's an interesting RV internet set up. https://wa9ace.net/2021/08/01/rv-internet.html https://wa9ace.net/2021/08/01/rv-internet.html

refurb 5y ago

This theory doesn’t work for one of the biggest bubbles of 2007, which was Las Vegas. It has nothing but surrounding land to build on. They built like crazy and still had massive price inflation followed by a bubble popping, prices dropped almost 50% and vast swathes of empty houses remained for years and prices only recovered to the peak in the last year or two.

eurasiantiger 5y ago
Money laundering explains Vegas and New York.
- vl 5y ago
  But how exactly can you launder money through buying a house? If you buy, essentially you declare you have the money, thus question can be asked where you got it from.
  - hef19898 5y ago
    That seems to explain it rather good (not that I would be able to tell, but it real estate money laundering is problem): https://www.icij.org/investigations/fincen-files/a-kleptocrats-dream-us-real-estate-a-safe-haven-for-billions-in-dirty-money-report-says/ https://www.icij.org/investigations/fincen-files/a-kleptocra... That is an interesting bit from the lined article: "One of the biggest issues that the report cites is the use of geographic targeting orders as the U.S.’s primary tool to identify potential money laundering events. GTOs impose reporting requirements on real estate purchases, but only in narrowly targeted scenarios — large cash purchases by legal entities in specific geographic areas."
  - kccqzy 5y ago
    With a mortgage certainly the bank will ask where your down payment comes from. But do all-cash buyers really get asked where the money comes from?
    - heurisko 5y ago

greatpostman 5y ago

Paul krugman has been wrong on almost everything

ta2234234242 5y ago
When you win a nobel prize in economics, I will listen to you more.
- carrolldunham 5y ago
  Hmm you might want to have a look into that particular "nobel prize" category
- political12345 5y ago
  educate yourself https://en.m.wikipedia.org/wiki/Argument_from_authority https://en.m.wikipedia.org/wiki/Argument_from_authority
- mannerheim 5y ago
  There is no such prize. There's a Sveriges Riksbank Prize in Memory of Alfred Nobel.
  - alasdair_ 5y ago
    To be fair, it's still a yearly prize, for economics, awarded by the same Nobel Foundation that awards the other prizes, under the same rules as the other prizes. The laureates are announced at the same time as the other laureates, the awards are presented in the same manner as the others and everyone shows up to the same Nobel Prize Awards Ceremony. And if we really want to go full pedant, the award isn't called anything in English at all, the real name is the "Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne" But pedantry is silly, right?
    - mannerheim 5y ago
      'Sveriges Riksbank Prize in Memory of Alfred Nobel' is more or less a literal translation of the Swedish name, minus the part about 'in economic science' and whether or not you feel like translating the name of the Swedish royal bank. Anyway, even the Nobel Foundation explicitly says it isn't a Nobel Prize: > Not a Nobel Prize > The prize in economic sciences is not a Nobel Prize. https://www.nobelprize.org/nomination/economic-sciences/ https://www.nobelprize.org/nomination/economic-sciences/

flukus 5y ago

> When the demand for houses rises, Flatland metropolitan areas, which don't really have traditional downtowns, just sprawl some more. And this is the driving force behind those cities going bankrupt, they're easy to build but not sustainable in the long term: https://www.youtube.com/watch?v=7Nw6qyyrTeI https://www.youtube.com/watch?v=7Nw6qyyrTeI

johnny_reilly 5y ago

> Just pity the countries that effectively don't have a Flatland, like Australia, the UK and NZ. Ha! I see your "UK does not have flatlands" and I raise you Norfolk. V flat indeed

KaiserPro 5y ago
Oi think yew are mistakun boh. Narfuck dont have noe flatlands, oonlee the fens, en thas moostly linconshire boh. Noel Coward and his fucking quips. However, the fens is a sinking bog, so not great for building on, especially as its in the middle of fucking nowhere and 180 degrees of depressive grey most of the time. but but but, its a good quote.

nabla9 5y ago

In the Zoned Zone parents paying for their children's education in house prices was one reason for price increases (prices in areas with good public schools skyrocketed). The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke (2004) https://en.wikipedia.org/wiki/The_Two-Income_Trap https://en.wikipedia.org/wiki/The_Two-Income_Trap