8 ms·

> incentivizing developers to build affordable housing But that's unnecessary. If developers build more luxury housing, that'll reduce the price of existing h

by xapata 5y ago

> incentivizing developers to build affordable housing But that's unnecessary. If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable.

RangerScience 5y ago
That (first) either assumes demand remains constant, or requires measuring actual cost vs theoretical cost instead of simply actual; and second, assumes that there aren't complex interdependencies - ie, more luxury housing can make an area more desirable and increase demand more than it increases supply - arguably that's the goal, since otherwise you're literally building places people want to live in less than what's already available.
- xapata 5y ago
  > more luxury housing can make an area more desirable Depends how big the "area" is that you're thinking about. The effect of increasing housing supply is well-studied. Demand can only grow as fast as the population does. If one area experiences increasing demand, then another area will have decreasing demand, comparatively.
  - nradov 5y ago
    That relationship doesn't hold in ski resort areas. Wealthy people have increasingly bought up vacation homes even as the population remains flat. Those vacation homes are vacant much of the year. There are usually geographic and infrastructure constraints which make it impossible to build significant amounts of new housing within practical commuting distance. So long time local residents are effectively being forced out.
    - xapata 5y ago
      I have little sympathy for people that are "forced" to sell their homes for a large capital gain. They can move to where it's cheap and live large. Maybe my perspective as an immigrant is unusual, but I'm a big fan of the freedom to migrate. That includes the freedom to buy housing at market price.
      - nradov 5y ago
        Most of the people being forced out are renters.
        xapata 5y ago
        Then it's even easier to move. If the polity doesn't want to zone for more housing, they've chosen to expel people who can't pay more than $X for rent. They'll feel the pain when there's no one around to make their coffee anymore. There's no such thing as unlimited demand for luxury housing. Build enough and the rent will fall for the existing housing stock.
        bombcar 5y ago
        I’m starting to feel we may be nearing a local maximum on housing, as more and more arguments seem to take for granted that it can never go down …
        seoaeu 5y ago
        > Then it's even easier to move. Moving requires finding a home somewhere that they can afford. The fact that they’ve been subjected to rising rents rather than a financial windfall like nearby homeowners… makes that far more difficult for them
        upvotepartytime 5y ago
        They could have bought. Instead they took advantage of the optionality afforded to a renter that can up stakes and move at will, without being tied to a mortgage. If they couldn’t afford to buy then they got to take advantage of a locale they desired at a lower price, another benefit of renting. (While it would be nice if anyone could live — and own — anywhere they like without worrying about price or competing demand from the billions of other humans around, that’s so far away from reality it’s not worth discussing.)
  - RangerScience 5y ago
    Hmm. I guess that makes sense if you're looking comparatively within an area. I'm talking about an area as a whole; in particularly, I'm thinking of Venice CA and the DTLA arts district, as two distinct areas. (AFAIK) Venice is pretty much entirely shit house -> excellent house development, with some multi-unit (townhouses). DTLA is shit building -> modern condos / luxury apts. AFAIK in both places a secondary effect of all development is that each area becomes more desirable. I guess, sure, if one stopped becoming more desirable the pull from the other would change demand between the two, but, a) they're not, they're both developing, b) (anecdotally) that's a drop in the bucket compared to the overall demand, and c) they have sufficiently different appeals that the demand isn't coming from the same people.
    - xapata 5y ago
      What's causing the increased demand: births, immigration, or increased wealth? The pair of Venice and Downtown LA are not closed system. If people are immigrating to those places, then they've left somewhere else, which experiences a declining demand for housing.
jerf 5y ago
There's a path dependency problem. In principle, had you just been building housing like that all along, investing in housing is not appealing as you shouldn't see significant gains in general. However, now that it is appealing, the investment itself pushes up demand, which pushes up the appeal of investing because now prices are going up, which pushes up demand, etc. Again, in principle, if you just keep building, the market would eventually sort this out. Of course, in the process, you'll overbuild housing proportionally to the investment demand. Once the investment demand leaves, the market will crash, which isn't necessarily a great plan either. And we are talking about a lot of finite resources being misallocated in the meantime, while the market forces figure this out. If you'd like to resolve this problem faster than the market would naturally sort it out, and harness market forces to do so rather than naively fighting them, it makes sense to cut out the excess, artificial investment demand in the meantime. Sure, it would be better to have not created that problem in the first place, but, here we are.
- worik 5y ago
  Market forces are not magic, nor the only method of economic planning. When markets work they are very good at finding prices. But when they fail you get this sort of thing. There needs to be a lot of planned intervention in the housing sector. Entities with a lot of capital need to build the houses that people need to live in where they need to live in them and then let them live in them. The market will not do that.
  - jefftk 5y ago
    The market ("people who would stand to earn a lot of money") would be happy to do that, but it's not allowed to (zoning: height limits, parking requirements, lot coverage, maximum floor area...)
  - handmodel 5y ago
    I live in Los Angeles and am lucky enough to rent on a street that is single family houses. It is illegal to build a duplex here, or a structure above 2 stories, even though each house must be 2500 sqft still. People who are pro-market forces (such as myself) believe strongly that if you were allowed to build apartment buildings in neighborhoods like this that enough capital absolutely would be raised to raise supply. After all, you could take the current house I rent now and put in two walls for under 50k and start renting it out as a duplex two families but that is currently illegal. Hard to blame the market forces for this.
jjav 5y ago
> If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable. Not really: Say there's one free acre of land in town. You could build one mansion on it, or a highrise with 100 apartments. Building the mansion isn't going to move the needle on any existing housing at all, as it's just one unit.
- paxys 5y ago
  That isn't a matter of incentives but zoning laws.
- nine_k 5y ago
  I wonder why NYC has so few mansions, and so many high-rises.
  - undersuit 5y ago
    The high rises in NYC are mansions.
    - nine_k 5y ago
      Occupied by one extended family?
- frenchy 5y ago
  As long as land prices are high, a highrise should net a lot more profit though, would it not?
- alistairSH 5y ago
  Except, in a competitive/expensive market, the developer will pick the high-rise (almost) every time when allowed by law. Locally, when I see people complain about luxury housing being built, it's because the developer is building high-spec townhomes and selling them for $800k+. Instead of lower-spec townhomes at $500k. The developer can't fit appreciably more homes in the same footprint (they're all 3-4 stories tall here - reducing size likely means one fewer stories). And the market will bear $800k+, so that's what we get. The real answer is build even more homes. Or allow high-rises on the same lots. In theory, the family that buys the $800k townhome came from somewhere. The smaller house they vacated is now open for somebody else (who in turn moved out of a studio flat that's now open, and on down).
michaelmrose 5y ago
Alternatively you end up with more empty housing poor to middling people can't afford while a bigger portion of society has the life sucked out of them by housing costs work 2nd jobs spend less time with their kids or on self improvement. Save less. Crash harder during down turns etc.
- xapata 5y ago
  Speculators will eventually mark to market and sell or rent their empty houses. It might take a while, but it's a big country. Housing is illiquid on a small scale, but is a fairly efficient market on the national level. Except for the zoning rules, of course. That's the nice thing about living in the US or a Schengen country. It's easy to move to where the economy is better.
shkkmo 5y ago
Up to a point, this is true when the affordable housing has had it's cost bid up by high end customers because of a scarcity of high end housing. However, once that high end market pressure has been abated, then there a real and hard limits to the amount of high end housing that can/will be available to low income customers. Instead of being available cheaply, this high-end housing stock will end up being used as a vacation house or a short the rental, neither of which actually help reduce local demand for housing.
- xapata 5y ago
  Suppliers will build more until the market clears. If prices are rising, that's a signal to suppliers to keep building. They won't stop until prices fall.
- seoaeu 5y ago
  We’re not anywhere close to this in any of the high cost markets. But once we do get to that point another thing will happen: the lower demand for high end housing (there’s only so many vacation homes and short term rentals you can sell) will make it economical to build new mid-range housing
  - shkkmo 5y ago
    > there’s only so many vacation homes and short term rentals you can sell) There are many markets the the number you can sell far exceeds the available land to build. I fail to see how lower demand for high end housing makes it more economical to build mid-range housing? The price for that housing will be lower and land to buiody it on will be taken up by lower density high end housing. High end housing construction is better than no construction, but please don't pretend it is sufficient to solve the need for other types of construction.
    - seoaeu 5y ago
      The amount to housing you can fit in a given metro absent zoning is basically unlimited. Manhattan has a population density of 75,000 people/square mile, and could be much higher without “air rights” limiting construction or the abnormally high percentage of commercial real estate. Many of the cities that are supposedly out of land have population densities an order of magnitude lower. Developers today build low density single family homes often due to zoning. If the law says you can build 3000 sqft on a given lot, the most profitable thing to build is probably single family. But if they were allowed 30,000 sqft or 300,000 sqft then you’re almost surely going to get multi family instead. At that point high end and mid range condos will likely both be profitable, but developer returns would be better for the former (if they can find buyers). So as high end buyers become more scarce, more developers will transition to mid range
heavyset_go 5y ago
There are housing insecure people who need housing now and not some nebulous time in the future when the market could, theoretically, correct itself. Markets are notorious for remaining irrational in the face of obvious market forces that should, theoretically, influence them. While we wait for housing to trickle down, people will go without homes, possibly for decades. It's a classic market failure, and doubling down on "markets but more this time" might not exactly help, either.
- gwright 5y ago
  > It's a classic market failure If you mean classic "free" market failure, then I would disagree. The housing market is replete with constraints that are imposed by government. I think it is more accurate to say that it is a classic regulatory failure (at least in some jurisdictions).
- digisign 5y ago
  Unhindered housing markets haven't been allowed to exist for fifty years. Homes for people of limited means, outlawed for almost a century. https://en.wikipedia.org/wiki/Single_room_occupancy https://en.wikipedia.org/wiki/Single_room_occupancy
danans 5y ago
> If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable. If the last few decades have taught us anything, it'd that location (and every social category that location encodes) matters to people more than luxury, or rather a desirable location is the biggest luxury. This is why a 3 BD fixer-upper in Palo Alto will cost more than a luxury 5 bedroom house in East San Jose. To have any effect on housing prices I desirable places, you'd have to build gobs more housing in the highly desirable places, but those are usually the places most opposed to new housing development. And if you build a little bit more, because location dominates all, the existing housing would be as expensive as the new luxury housing in that location, because there is always a higher demand/supply ratio to live in Palo Alto than for East San Jose. By the same token, building luxury housing in less desirable places won't change things unless you somehow make those places more desirable, but that takes a lot more than new luxury apartments. You usually have to change the kind of people that inhabit that location. We absolutely need to build more housing of all categories everywhere, but it won't have much effect on housing costs until we address transportation, public education, and crime, the massive factors that affect housing costs.
- majormajor 5y ago
  Even if you had no zoning or "organized" NIMBY restrictions, it would be extremely slow to build denser in the most popular "full" residential places: any new construction there requires someone else to sell and leave for that construction to take place. You aren't going to be able to build a hundred-unit tower like you could if the land was empty or was just a vacant old structure. Targeting stuff that isn't currently residential would be a much easier starting point. IMO, but more controversially, it goes even further: in the long run, especially with fast transportation and digital communications, it's hard to see certain places ever getting "affordable" given today's wealth distributions. Some locations are going to be in higher demand due to non-human-development related factors (weather, scenery, etc). Others due more to development factors: NYC is more in-demand than if it was an empty bunch of land because we've already done a bunch of development there. (That latter case is especially interesting because it shows how development can both increase supply AND demand, it's not solely something that affects supply.) So if some places are inherently going to be more in-demand than others, and you build more when the market price is currently $X, prices won't fall very quickly at all as you get the people who otherwise want to live there, but couldn't do $X but would do it for $X-1, $X-2, etc, now re-interested in the area!
rbanffy 5y ago
> If developers build more luxury housing According to this reasoning, if Ferrari builds more cars, Fiats will get less expensive. I don’t think that’s how it’s supposed to work.
- cycrutchfield 5y ago
  If Ferrari sold 10 million cars per year, you don’t think that would have a downward pricing impact on other cars?
  - _carbyau_ 5y ago
    Basically, not sure how to interpret "sold 10 million cars". 2 scenarios come to mind: 1. Ferrari decrease their sale prices, thus they are more affordable for all, thus exerting price pressure on Fiat. 2. People somehow have a bucket more money and now buy Ferraris. But with all this money sloshing around, Fiat might as well up their prices because it'd make little difference on the end customers purchase decision. In either case, the Ferrari and the Fiat are closer on price but the price pressure on Fiat varies. Curious to know your thoughts?
- YokoZar 5y ago
  The vast majority of affordable cars are used cars. Used cars are cheaper when there's tons of new cars, and they get more expensive when new car production slows - prices jumped so much in the past two years that some used cars were sold for more than they were originally purchased for. We treat that weird situation as obvious undersupply in the car market, but somehow expect it with houses. Why should old, used houses sell for more than their purchase price?
  - xapata 5y ago
    People forget that houses depreciate. It's the land that appreciates.
    - seoaeu 5y ago

by xapata 5y ago

> incentivizing developers to build affordable housing But that's unnecessary. If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable.

RangerScience 5y ago

That (first) either assumes demand remains constant, or requires measuring actual cost vs theoretical cost instead of simply actual; and second, assumes that there aren't complex interdependencies - ie, more luxury housing can make an area more desirable and increase demand more than it increases supply - arguably that's the goal, since otherwise you're literally building places people want to live in less than what's already available.

xapata 5y ago
> more luxury housing can make an area more desirable Depends how big the "area" is that you're thinking about. The effect of increasing housing supply is well-studied. Demand can only grow as fast as the population does. If one area experiences increasing demand, then another area will have decreasing demand, comparatively.
- nradov 5y ago
  That relationship doesn't hold in ski resort areas. Wealthy people have increasingly bought up vacation homes even as the population remains flat. Those vacation homes are vacant much of the year. There are usually geographic and infrastructure constraints which make it impossible to build significant amounts of new housing within practical commuting distance. So long time local residents are effectively being forced out.
  - xapata 5y ago
    I have little sympathy for people that are "forced" to sell their homes for a large capital gain. They can move to where it's cheap and live large. Maybe my perspective as an immigrant is unusual, but I'm a big fan of the freedom to migrate. That includes the freedom to buy housing at market price.
    - nradov 5y ago
      Most of the people being forced out are renters.
      - xapata 5y ago
        Then it's even easier to move. If the polity doesn't want to zone for more housing, they've chosen to expel people who can't pay more than $X for rent. They'll feel the pain when there's no one around to make their coffee anymore. There's no such thing as unlimited demand for luxury housing. Build enough and the rent will fall for the existing housing stock.
        bombcar 5y ago
        I’m starting to feel we may be nearing a local maximum on housing, as more and more arguments seem to take for granted that it can never go down …
        seoaeu 5y ago
        > Then it's even easier to move. Moving requires finding a home somewhere that they can afford. The fact that they’ve been subjected to rising rents rather than a financial windfall like nearby homeowners… makes that far more difficult for them
        upvotepartytime 5y ago
        They could have bought. Instead they took advantage of the optionality afforded to a renter that can up stakes and move at will, without being tied to a mortgage. If they couldn’t afford to buy then they got to take advantage of a locale they desired at a lower price, another benefit of renting. (While it would be nice if anyone could live — and own — anywhere they like without worrying about price or competing demand from the billions of other humans around, that’s so far away from reality it’s not worth discussing.)
- RangerScience 5y ago
  Hmm. I guess that makes sense if you're looking comparatively within an area. I'm talking about an area as a whole; in particularly, I'm thinking of Venice CA and the DTLA arts district, as two distinct areas. (AFAIK) Venice is pretty much entirely shit house -> excellent house development, with some multi-unit (townhouses). DTLA is shit building -> modern condos / luxury apts. AFAIK in both places a secondary effect of all development is that each area becomes more desirable. I guess, sure, if one stopped becoming more desirable the pull from the other would change demand between the two, but, a) they're not, they're both developing, b) (anecdotally) that's a drop in the bucket compared to the overall demand, and c) they have sufficiently different appeals that the demand isn't coming from the same people.
  - xapata 5y ago
    What's causing the increased demand: births, immigration, or increased wealth? The pair of Venice and Downtown LA are not closed system. If people are immigrating to those places, then they've left somewhere else, which experiences a declining demand for housing.

jerf 5y ago

There's a path dependency problem. In principle, had you just been building housing like that all along, investing in housing is not appealing as you shouldn't see significant gains in general. However, now that it is appealing, the investment itself pushes up demand, which pushes up the appeal of investing because now prices are going up, which pushes up demand, etc. Again, in principle, if you just keep building, the market would eventually sort this out. Of course, in the process, you'll overbuild housing proportionally to the investment demand. Once the investment demand leaves, the market will crash, which isn't necessarily a great plan either. And we are talking about a lot of finite resources being misallocated in the meantime, while the market forces figure this out. If you'd like to resolve this problem faster than the market would naturally sort it out, and harness market forces to do so rather than naively fighting them, it makes sense to cut out the excess, artificial investment demand in the meantime. Sure, it would be better to have not created that problem in the first place, but, here we are.

worik 5y ago
Market forces are not magic, nor the only method of economic planning. When markets work they are very good at finding prices. But when they fail you get this sort of thing. There needs to be a lot of planned intervention in the housing sector. Entities with a lot of capital need to build the houses that people need to live in where they need to live in them and then let them live in them. The market will not do that.
- jefftk 5y ago
  The market ("people who would stand to earn a lot of money") would be happy to do that, but it's not allowed to (zoning: height limits, parking requirements, lot coverage, maximum floor area...)
- handmodel 5y ago
  I live in Los Angeles and am lucky enough to rent on a street that is single family houses. It is illegal to build a duplex here, or a structure above 2 stories, even though each house must be 2500 sqft still. People who are pro-market forces (such as myself) believe strongly that if you were allowed to build apartment buildings in neighborhoods like this that enough capital absolutely would be raised to raise supply. After all, you could take the current house I rent now and put in two walls for under 50k and start renting it out as a duplex two families but that is currently illegal. Hard to blame the market forces for this.

jjav 5y ago

> If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable. Not really: Say there's one free acre of land in town. You could build one mansion on it, or a highrise with 100 apartments. Building the mansion isn't going to move the needle on any existing housing at all, as it's just one unit.

paxys 5y ago
That isn't a matter of incentives but zoning laws.
nine_k 5y ago
I wonder why NYC has so few mansions, and so many high-rises.
- undersuit 5y ago
  The high rises in NYC are mansions.
  - nine_k 5y ago
    Occupied by one extended family?
frenchy 5y ago
As long as land prices are high, a highrise should net a lot more profit though, would it not?
alistairSH 5y ago
Except, in a competitive/expensive market, the developer will pick the high-rise (almost) every time when allowed by law. Locally, when I see people complain about luxury housing being built, it's because the developer is building high-spec townhomes and selling them for $800k+. Instead of lower-spec townhomes at $500k. The developer can't fit appreciably more homes in the same footprint (they're all 3-4 stories tall here - reducing size likely means one fewer stories). And the market will bear $800k+, so that's what we get. The real answer is build even more homes. Or allow high-rises on the same lots. In theory, the family that buys the $800k townhome came from somewhere. The smaller house they vacated is now open for somebody else (who in turn moved out of a studio flat that's now open, and on down).

michaelmrose 5y ago

Alternatively you end up with more empty housing poor to middling people can't afford while a bigger portion of society has the life sucked out of them by housing costs work 2nd jobs spend less time with their kids or on self improvement. Save less. Crash harder during down turns etc.

xapata 5y ago
Speculators will eventually mark to market and sell or rent their empty houses. It might take a while, but it's a big country. Housing is illiquid on a small scale, but is a fairly efficient market on the national level. Except for the zoning rules, of course. That's the nice thing about living in the US or a Schengen country. It's easy to move to where the economy is better.

shkkmo 5y ago

Up to a point, this is true when the affordable housing has had it's cost bid up by high end customers because of a scarcity of high end housing. However, once that high end market pressure has been abated, then there a real and hard limits to the amount of high end housing that can/will be available to low income customers. Instead of being available cheaply, this high-end housing stock will end up being used as a vacation house or a short the rental, neither of which actually help reduce local demand for housing.

xapata 5y ago
Suppliers will build more until the market clears. If prices are rising, that's a signal to suppliers to keep building. They won't stop until prices fall.
seoaeu 5y ago
We’re not anywhere close to this in any of the high cost markets. But once we do get to that point another thing will happen: the lower demand for high end housing (there’s only so many vacation homes and short term rentals you can sell) will make it economical to build new mid-range housing
- shkkmo 5y ago
  > there’s only so many vacation homes and short term rentals you can sell) There are many markets the the number you can sell far exceeds the available land to build. I fail to see how lower demand for high end housing makes it more economical to build mid-range housing? The price for that housing will be lower and land to buiody it on will be taken up by lower density high end housing. High end housing construction is better than no construction, but please don't pretend it is sufficient to solve the need for other types of construction.
  - seoaeu 5y ago
    The amount to housing you can fit in a given metro absent zoning is basically unlimited. Manhattan has a population density of 75,000 people/square mile, and could be much higher without “air rights” limiting construction or the abnormally high percentage of commercial real estate. Many of the cities that are supposedly out of land have population densities an order of magnitude lower. Developers today build low density single family homes often due to zoning. If the law says you can build 3000 sqft on a given lot, the most profitable thing to build is probably single family. But if they were allowed 30,000 sqft or 300,000 sqft then you’re almost surely going to get multi family instead. At that point high end and mid range condos will likely both be profitable, but developer returns would be better for the former (if they can find buyers). So as high end buyers become more scarce, more developers will transition to mid range

heavyset_go 5y ago

There are housing insecure people who need housing now and not some nebulous time in the future when the market could, theoretically, correct itself. Markets are notorious for remaining irrational in the face of obvious market forces that should, theoretically, influence them. While we wait for housing to trickle down, people will go without homes, possibly for decades. It's a classic market failure, and doubling down on "markets but more this time" might not exactly help, either.

gwright 5y ago
> It's a classic market failure If you mean classic "free" market failure, then I would disagree. The housing market is replete with constraints that are imposed by government. I think it is more accurate to say that it is a classic regulatory failure (at least in some jurisdictions).
digisign 5y ago
Unhindered housing markets haven't been allowed to exist for fifty years. Homes for people of limited means, outlawed for almost a century. https://en.wikipedia.org/wiki/Single_room_occupancy https://en.wikipedia.org/wiki/Single_room_occupancy

danans 5y ago

> If developers build more luxury housing, that'll reduce the price of existing housing, such that it becomes affordable. If the last few decades have taught us anything, it'd that location (and every social category that location encodes) matters to people more than luxury, or rather a desirable location is the biggest luxury. This is why a 3 BD fixer-upper in Palo Alto will cost more than a luxury 5 bedroom house in East San Jose. To have any effect on housing prices I desirable places, you'd have to build gobs more housing in the highly desirable places, but those are usually the places most opposed to new housing development. And if you build a little bit more, because location dominates all, the existing housing would be as expensive as the new luxury housing in that location, because there is always a higher demand/supply ratio to live in Palo Alto than for East San Jose. By the same token, building luxury housing in less desirable places won't change things unless you somehow make those places more desirable, but that takes a lot more than new luxury apartments. You usually have to change the kind of people that inhabit that location. We absolutely need to build more housing of all categories everywhere, but it won't have much effect on housing costs until we address transportation, public education, and crime, the massive factors that affect housing costs.

majormajor 5y ago
Even if you had no zoning or "organized" NIMBY restrictions, it would be extremely slow to build denser in the most popular "full" residential places: any new construction there requires someone else to sell and leave for that construction to take place. You aren't going to be able to build a hundred-unit tower like you could if the land was empty or was just a vacant old structure. Targeting stuff that isn't currently residential would be a much easier starting point. IMO, but more controversially, it goes even further: in the long run, especially with fast transportation and digital communications, it's hard to see certain places ever getting "affordable" given today's wealth distributions. Some locations are going to be in higher demand due to non-human-development related factors (weather, scenery, etc). Others due more to development factors: NYC is more in-demand than if it was an empty bunch of land because we've already done a bunch of development there. (That latter case is especially interesting because it shows how development can both increase supply AND demand, it's not solely something that affects supply.) So if some places are inherently going to be more in-demand than others, and you build more when the market price is currently $X, prices won't fall very quickly at all as you get the people who otherwise want to live there, but couldn't do $X but would do it for $X-1, $X-2, etc, now re-interested in the area!

rbanffy 5y ago

> If developers build more luxury housing According to this reasoning, if Ferrari builds more cars, Fiats will get less expensive. I don’t think that’s how it’s supposed to work.

cycrutchfield 5y ago
If Ferrari sold 10 million cars per year, you don’t think that would have a downward pricing impact on other cars?
- _carbyau_ 5y ago
  Basically, not sure how to interpret "sold 10 million cars". 2 scenarios come to mind: 1. Ferrari decrease their sale prices, thus they are more affordable for all, thus exerting price pressure on Fiat. 2. People somehow have a bucket more money and now buy Ferraris. But with all this money sloshing around, Fiat might as well up their prices because it'd make little difference on the end customers purchase decision. In either case, the Ferrari and the Fiat are closer on price but the price pressure on Fiat varies. Curious to know your thoughts?
YokoZar 5y ago
The vast majority of affordable cars are used cars. Used cars are cheaper when there's tons of new cars, and they get more expensive when new car production slows - prices jumped so much in the past two years that some used cars were sold for more than they were originally purchased for. We treat that weird situation as obvious undersupply in the car market, but somehow expect it with houses. Why should old, used houses sell for more than their purchase price?
- xapata 5y ago
  People forget that houses depreciate. It's the land that appreciates.
  - seoaeu 5y ago