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Housing prices are mostly supply and demand driven, but it's the supply and demand of location, not of the building itself. Next to that, the maximum price is
by ako 4y ago
Housing prices are mostly supply and demand driven, but it's the supply and demand of location, not of the building itself.
Next to that, the maximum price is largely defined by how much people can and are willing to borrow with a typical income for the location and the type of building.
And with location being in short supply, locations (and houses) go for maximum price. With rent going up, maximum price will come down, to keep total price the same.
- geysersam 4y ago> how much people can borrow This is the main factor, and it's a result of the monetary policy of the last decades. Since this number has been increasing compared to wages, it's becoming less sensible to build apartments for rental. But at the same time, those are needed to increase density and availability of affordable housing in attractive cities. It's a mess.
- Karrot_Kream 4y agoIt's complicated. The loose monetary policy is certainly one aspect. Another is that most American city-center residential areas are still zoned at low densities. If organic growth could lead to organic densification in central locations, there would be less impact to the housing market, but American zoning is stuck in the aftermath of WWII and is loathe to densify.
- cloudier 4y agoYep. One study^1 estimates that zoning and land use restrictions across the country leads to an (unnecessary) increase in housing costs worth 2% of the US GDP (about $400 billion). [1]: https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.1.3 https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.32.1.3
- tsss 4y agoEnvironmental regulations and such also artificially increase the price of older buildings because you can buy existing buildings that don't fulfil new regulations but can't build new ones. This is effectively a top-down supply restriction of low quality housing.