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The higher the ROI the more people invest in building housing, bringing the price of housing and the ROI down. This is the general rule of supply and demand, to

The higher the ROI the more people invest in building housing, bringing the price of housing and the ROI down. This is the general rule of supply and demand, to which exceptions are exceptional and rare. It is the single most well accepted principle in economics.

Iulioh 2y ago
Now imagine a spherical cow in a frictionless environment...
- deleted 2y ago
  [deleted]
6stringronin 2y ago
Is this /s ? I can't tell. This reeks of some trickle down nonsense speak. What these pe firms want is rent, control over a limited market, with inflated prices for a consumer base who's purchasing power has turned to mush. Prices will inflate because of limited supply and the consumer will the one holding the bag
- robertlagrant 2y ago
  The problem is the growing demand (mostly through government policy) and limited supply (mostly through government policy). So we should blame PE.
_spduchamp 2y ago
This does not drive down prices. What is different now is that the properties get leveraged for loans to purchase more properties. The loans are secured against future rents and the landlord cannot lower a single rent in response to market demand because it would signal to the lenders that it is an inflated asset, causing a domino effect on all the other loans. The property owner is would rather the property stay empty, take the loss, than lower the rent and risk their loans. This is a huge problem here in Toronto where REITs are doing this and causing rents to continuously ratchet up. Nobody wants to talk about it because everyone's retirement funds are full of REITs.
- freefaler 2y ago
  It will drive the prices down when enough supply hits the market. Current numbers are a joke compared to the demand generated. Leveraged loans can indeed create higher prices for a percentage of the market, but when supply approaches or exceeds the demand the "investment grade securities" will repeat the 2008 scenario. Check for example commercial properties in SF before and after COVID. After COVID (and SF city mismanagement) the supply > demand and prices went down a lot and investors lost money. Retail market is different, but the same scenario would work.
  - trilobyte 2y ago
    This has not happened for 15 years. It's entirely theoretical given current conditions, and we need to ground discussion in the reality where things are now.
    - freefaler 2y ago
      I wouldn't call SF office price a "theoretical". The supply/demand curve is one of the most time tested economic law. 15 years of bad zoning regulation and limiting suply doesn't disprove it.
dpbriggs 2y ago
That only work when supply isn't constrained.

Iulioh 2y ago

Now imagine a spherical cow in a frictionless environment...

deleted 2y ago
[deleted]

6stringronin 2y ago

Is this /s ? I can't tell. This reeks of some trickle down nonsense speak. What these pe firms want is rent, control over a limited market, with inflated prices for a consumer base who's purchasing power has turned to mush. Prices will inflate because of limited supply and the consumer will the one holding the bag

robertlagrant 2y ago
The problem is the growing demand (mostly through government policy) and limited supply (mostly through government policy). So we should blame PE.

_spduchamp 2y ago

This does not drive down prices. What is different now is that the properties get leveraged for loans to purchase more properties. The loans are secured against future rents and the landlord cannot lower a single rent in response to market demand because it would signal to the lenders that it is an inflated asset, causing a domino effect on all the other loans. The property owner is would rather the property stay empty, take the loss, than lower the rent and risk their loans. This is a huge problem here in Toronto where REITs are doing this and causing rents to continuously ratchet up. Nobody wants to talk about it because everyone's retirement funds are full of REITs.

freefaler 2y ago
It will drive the prices down when enough supply hits the market. Current numbers are a joke compared to the demand generated. Leveraged loans can indeed create higher prices for a percentage of the market, but when supply approaches or exceeds the demand the "investment grade securities" will repeat the 2008 scenario. Check for example commercial properties in SF before and after COVID. After COVID (and SF city mismanagement) the supply > demand and prices went down a lot and investors lost money. Retail market is different, but the same scenario would work.
- trilobyte 2y ago
  This has not happened for 15 years. It's entirely theoretical given current conditions, and we need to ground discussion in the reality where things are now.
  - freefaler 2y ago
    I wouldn't call SF office price a "theoretical". The supply/demand curve is one of the most time tested economic law. 15 years of bad zoning regulation and limiting suply doesn't disprove it.

dpbriggs 2y ago

That only work when supply isn't constrained.