4 ms·

Rather than worry about hoarding, what if it was just easier to build more of it? Look at zoning in SF bay area. Or Sydney.

andrewstuart 4y ago
Ahhh, the old "supply is the solution!" response. "More supply will solve insane pricing!" is what governments and property investors like to say. It sure sounds plausible - sounds like market economics doesn't it..... if there's so much of something on the market that supply outstrips demand then prices MUST go down, right? Seems like a ridiculous idea to me that so many houses will be built that prices will crash down to the level that anyone can buy them. In fact I think what happens when there is more supply is that investors buy more houses to put renters into. It will never happen that so many houses will be built that they become so cheap that the pricing will crash. Property developers love to say "more supply!" because it makes them more money, that's all - they know more supply will never drives prices down so much that anyone could afford a house.
- sokoloff 4y ago
  > when there is more supply is that investors buy more houses to put renters into. Where would the investors create these new renters from? Immigration and net-new household formation are two sources. (If rental properties are cheaper, people might move out of their parents house earlier, might take fewer [possibly zero] roommates, or might move to a location because the rent is cheap. All of those factors seem quite small compared to a contemplated large increase in housing supply. However, you can only make so many new households by driving the price of rent down. At some point, either new households stop being able to soak up the supply or investors aren't willing to keep pushing the price of rentals down.) Turn the problem around. If we assume as a given that some people can't afford houses at the level of supply that currently exists, does not increasing the supply help those hopeful buyers at all?
- danielmarkbruce 4y ago
  >> Seems like a ridiculous idea to me that so many houses will be built that prices will crash down to the level that anyone can buy them There is an entire history of business where that exact thing happens (assuming anyone isn't literal). Watch the markets for energy (increased drilling causes prices to drop), metals (mines come online, prices drop), ag commodities... and real estate. There was a massive overbuild in the US during the late 90's and early 2000s, which resulted in a big drop in prices. See here: https://tradingeconomics.com/united-states/housing-starts#:~:text=Housing%20Starts%20in%20the%20United,units%20in%20April%20of%202009 https://tradingeconomics.com/united-states/housing-starts#:~.... The US needed around 1-1.2 million houses to cover new household formation during that period. Massive overbuild. Now look at prices: https://fred.stlouisfed.org/series/ASPUS https://fred.stlouisfed.org/series/ASPUS Notice the dip after there had been a build up of supply? Prices dropped about 30%. Then notice the shortage of building for several years... and a run up in prices shortly after? The old supply and demand... Just using common sense - land is a gigantic part of the cost of a house. If zoning laws made it such that you can build more units on a given piece of land...how could prices do anything but go down? The old "supply is the solution" is old because it has been true since the beginning of humans buying and selling things.
  - nerdponx 4y ago
    It's not a theoretical question, but a practical question of relative magnitudes. Can we actually supply enough housing to stabilize prices? And let's say we did, perhaps a great cost, but then what happens in the next big demographic shift? And what of the environmental impact in the process? The "direct" solution is not always the best. This line of thinking always reminds me of the approach to medicine where they'd rather cut out your gallbladder than put you on an elimination diet and send you to an acupuncturist.
    - sokoloff 4y ago
      Given that there are many areas of the US where there is enough housing for houses to be affordable by the barely or not-quite middle class, it seems like that is possible. Detroit, Pittsburgh, Buffalo, Memphis, Oklahoma City, Kansas City, Richmond, New Orleans, Cincinnati, Columbus, Cleveland, Philly and lots of the surrounding suburban and rural areas.
- AnimalMuppet 4y ago
  > In fact I think what happens when there is more supply is that investors buy more houses to put renters into. Solve that with more supply. Those people only have finite money. We can keep building inexpensive housing and selling it to them at insane prices for longer than they can keep buying them at insane prices. The problem is that, once we break them, then we almost certainly overshoot. The price seriously craters, and everyone who bought a house in the last N years takes a huge bath.
  - rsj_hn 4y ago
    This is basically the housing market. Homebuilders react to high prices by continuing to build more homes as long as they can do so at a profit. Not hard to understand. There is always overshooting. That's OK, it results in a lot of homes. Those who complain that there isn't enough housing are complaining that they are being priced out of popular areas. It's like complaining you can't afford a BMW and have to stick with an old Ford. Housing in the U.S. is still available and home ownership rates are relatively high. The problem is that well-paid jobs are scarce, and getting scarcer, which puts a lot of pressure on housing in the handful of areas that have well-paid jobs. But that's not a problem with the national housing market, but the local markets in hot regions, which are captive to local zoning laws in those markets. Again, not something homebuilders can address easily. I wish people would stop talk about housing problems and instead focus on the distribution-of-jobs problem. Housing is never going to be fast enough to catch up to a hot jobs market area, and it will always end up overshooting. Moreover, as a nation, we need well paid jobs to be much more geographically diverse if we are to survive as something other than pockets of wealth surrounded by vast regions of poverty.
    - danielmarkbruce 4y ago
      Agree with a lot of this, but the zoning problems are real. They can't be fixed by homebuilders (of any type) and local governments face perverse incentives on the issue, so it can only be solved at a state level (US). In other jurisdictions it's likely similar.
      - 4y ago
- FredPret 4y ago
  What if we built a trillion houses; in your imagination, would all that housing still be expensive? Would each one have a tenant?
- twblalock 4y ago
  If supply and demand does not explain housing prices, then why was housing ever affordable?

andrewstuart 4y ago

Ahhh, the old "supply is the solution!" response. "More supply will solve insane pricing!" is what governments and property investors like to say. It sure sounds plausible - sounds like market economics doesn't it..... if there's so much of something on the market that supply outstrips demand then prices MUST go down, right? Seems like a ridiculous idea to me that so many houses will be built that prices will crash down to the level that anyone can buy them. In fact I think what happens when there is more supply is that investors buy more houses to put renters into. It will never happen that so many houses will be built that they become so cheap that the pricing will crash. Property developers love to say "more supply!" because it makes them more money, that's all - they know more supply will never drives prices down so much that anyone could afford a house.

sokoloff 4y ago
> when there is more supply is that investors buy more houses to put renters into. Where would the investors create these new renters from? Immigration and net-new household formation are two sources. (If rental properties are cheaper, people might move out of their parents house earlier, might take fewer [possibly zero] roommates, or might move to a location because the rent is cheap. All of those factors seem quite small compared to a contemplated large increase in housing supply. However, you can only make so many new households by driving the price of rent down. At some point, either new households stop being able to soak up the supply or investors aren't willing to keep pushing the price of rentals down.) Turn the problem around. If we assume as a given that some people can't afford houses at the level of supply that currently exists, does not increasing the supply help those hopeful buyers at all?
danielmarkbruce 4y ago
>> Seems like a ridiculous idea to me that so many houses will be built that prices will crash down to the level that anyone can buy them There is an entire history of business where that exact thing happens (assuming anyone isn't literal). Watch the markets for energy (increased drilling causes prices to drop), metals (mines come online, prices drop), ag commodities... and real estate. There was a massive overbuild in the US during the late 90's and early 2000s, which resulted in a big drop in prices. See here: https://tradingeconomics.com/united-states/housing-starts#:~:text=Housing%20Starts%20in%20the%20United,units%20in%20April%20of%202009 https://tradingeconomics.com/united-states/housing-starts#:~.... The US needed around 1-1.2 million houses to cover new household formation during that period. Massive overbuild. Now look at prices: https://fred.stlouisfed.org/series/ASPUS https://fred.stlouisfed.org/series/ASPUS Notice the dip after there had been a build up of supply? Prices dropped about 30%. Then notice the shortage of building for several years... and a run up in prices shortly after? The old supply and demand... Just using common sense - land is a gigantic part of the cost of a house. If zoning laws made it such that you can build more units on a given piece of land...how could prices do anything but go down? The old "supply is the solution" is old because it has been true since the beginning of humans buying and selling things.
- nerdponx 4y ago
  It's not a theoretical question, but a practical question of relative magnitudes. Can we actually supply enough housing to stabilize prices? And let's say we did, perhaps a great cost, but then what happens in the next big demographic shift? And what of the environmental impact in the process? The "direct" solution is not always the best. This line of thinking always reminds me of the approach to medicine where they'd rather cut out your gallbladder than put you on an elimination diet and send you to an acupuncturist.
  - sokoloff 4y ago
    Given that there are many areas of the US where there is enough housing for houses to be affordable by the barely or not-quite middle class, it seems like that is possible. Detroit, Pittsburgh, Buffalo, Memphis, Oklahoma City, Kansas City, Richmond, New Orleans, Cincinnati, Columbus, Cleveland, Philly and lots of the surrounding suburban and rural areas.
AnimalMuppet 4y ago
> In fact I think what happens when there is more supply is that investors buy more houses to put renters into. Solve that with more supply. Those people only have finite money. We can keep building inexpensive housing and selling it to them at insane prices for longer than they can keep buying them at insane prices. The problem is that, once we break them, then we almost certainly overshoot. The price seriously craters, and everyone who bought a house in the last N years takes a huge bath.
- rsj_hn 4y ago
  This is basically the housing market. Homebuilders react to high prices by continuing to build more homes as long as they can do so at a profit. Not hard to understand. There is always overshooting. That's OK, it results in a lot of homes. Those who complain that there isn't enough housing are complaining that they are being priced out of popular areas. It's like complaining you can't afford a BMW and have to stick with an old Ford. Housing in the U.S. is still available and home ownership rates are relatively high. The problem is that well-paid jobs are scarce, and getting scarcer, which puts a lot of pressure on housing in the handful of areas that have well-paid jobs. But that's not a problem with the national housing market, but the local markets in hot regions, which are captive to local zoning laws in those markets. Again, not something homebuilders can address easily. I wish people would stop talk about housing problems and instead focus on the distribution-of-jobs problem. Housing is never going to be fast enough to catch up to a hot jobs market area, and it will always end up overshooting. Moreover, as a nation, we need well paid jobs to be much more geographically diverse if we are to survive as something other than pockets of wealth surrounded by vast regions of poverty.
  - danielmarkbruce 4y ago
    Agree with a lot of this, but the zoning problems are real. They can't be fixed by homebuilders (of any type) and local governments face perverse incentives on the issue, so it can only be solved at a state level (US). In other jurisdictions it's likely similar.
    - 4y ago
FredPret 4y ago
What if we built a trillion houses; in your imagination, would all that housing still be expensive? Would each one have a tenant?
twblalock 4y ago
If supply and demand does not explain housing prices, then why was housing ever affordable?