4 ms·

Supply is artificially limited.

by wpm 2y ago

vidanay 2y ago
Not commercial RE
- graeme 2y ago
  Yes it is. There's no zoning law that says "You can only build houses here, no apartment, unless you build commercial real estate" Commercial real estate is generally illegal anywhere dense housing is also illegal.
- darth_avocado 2y ago
  Commercial RE too. When you say supply is constrained, they don’t mean there’s no RE available, they mean RE isn’t available at a lower price. Most cities in the US right now have a huge commercial RE vacancy rate, yet if you try to lease it, you’re not getting rates that a free market low demand situation is going to get you.
Tade0 2y ago
Supply can't possibly keep up when real estate is used as an investment. As an analogy to the dead internet hypothesis I present the dead real estate market hypothesis. Increasingly it's just investors buying and selling properties from each other. And it's not just a hypothesis. China built enough homes to house its population twice over, yet it's not reflected in the prices. All because everyone and their grandma is investing in real estate.
- WorldMaker 2y ago
  This is the lesson the board game Monopoly was originally intended to teach. The Georgism side of "The Landlord's Game" sometimes feels as relevant as ever, and as obvious as ever why those rules not packed into the game by Hasbro. (They aren't fun and we don't actually want to question what real estate ownership should mean.)
- UltraSane 2y ago
  It isn't a hypothesis. It is a well known fact. The more expensive a property is the more time it will be spent vacant because a lot of the very expensive properties are just uses as investments.
  - apwell23 2y ago
    why doesn't someone introduce a legislation to tax vacant second homes at astronomical rates
    - throw5959 2y ago
      Do you know who owns most real estate either directly or indirectly? Pension funds. And who wants to shake up their pension? Nobody. It's the most democratized form of asset ownership, literally everybody is going to get angry. And secondly... Are the second vacation homes really the problem? I'd guess the problem begins around 3rd or 5th, not the second one, which is a fairly common and usually also a good thing to have - for both the owner and the society.
      - apwell23 2y ago
        not talking about real estate in general. whats the proof that most vacant homes are owned by pension funds ? I don't think so.
      - hello_moto 2y ago
        Second vacation homes (plus Airbnb) become a problem for locals of that area. The young ones can't survive there and eventually have to rent (or provided as comp package) from established businesses (B&B/hotel).
      - radlad 2y ago
        > And secondly... Are the second vacation homes really the problem? I'd guess the problem begins around 3rd or 5th, not the second one, which is a fairly common and usually also a good thing to have - for both the owner and the society. I'm not sure if you mean owning one primary home and two vacation homes, or one primary home and one vacation home when you mention a "second vacation home," but either way this strikes me as out of touch. In 2024, US home ownership rate is 65.6%. (https://www.bankrate.com/homeownership/home-ownership-statistics/ https://www.bankrate.com/homeownership/home-ownership-statis...) In 2022, 4.6% of housing was comprised of second homes. (https://eyeonhousing.org/2024/09/the-nations-stock-of-second-homes-2/ https://eyeonhousing.org/2024/09/the-nations-stock-of-second...) 4.6% of 65.6% is 3%, meaning at most 3% of Americans own a second home (but this doesn't account for citizens that own 3 or more homes, so the actual percentage is even lower.) I don't consider that to be common. I also wonder: why is it a good thing for society (or even most homeowners?)
- jrwoodruff 2y ago
  Also made possible by the internet and computers in general, I'd argue. Without the easy availability of prices, sales data, and general number crunching capabilities I don't think this would be happening. Certainly not at the scale we're seeing.
- janalsncm 2y ago
  > enough homes to house its population twice over This is because a ton of them are in the Chinese equivalent of like Boise, Idaho where demand is fairly low. People want to live where the high paying jobs are.
  - tomrod 2y ago
    Bad example, Boise is a hot and desirable market. Better example: northern Alaska.
    - seanmcdirmid 2y ago
      Alaska in general. Fairbanks, Anchorage, Ketchikan are currently in decline, as is Alaska as a whole.
  - luhn 2y ago
    I get your point, but that's a terrible example because Boise is one of the fastest growing metro areas in the country.
- 7thaccount 2y ago
  Agreed, but one thing to note on the Chinese real estate is that a lot of it is apparently "tofu dregs", so a good portion of the real estate is just a building waiting to fall down that you can crumble with your bare hands (lots of YouTube videos on this) and a lot of the supply is also in the middle of nowhere. So the supply is kind of not as much there as you would normally think. To use an analogy, does building a massive housing complex in the middle of the Mojave help American home prices come down?
- zamfi 2y ago
  > China built enough homes to house its population twice over, yet it's not reflected in the prices. All because everyone and their grandma is investing in real estate. Yes, but this is reflected in China's vacancy rate: 22% by some estimates. In the US, home vacancy rates are sub-1%. Not saying people aren't treating homes as investments, but it seems clear we also have a supply issue. "Real Estate is Investment" should naturally lead to overproduction as investment-only properties get built to satisfy that demand—as we see in China. In the US, we don't see that.
  - seanmcdirmid 2y ago
    The methodology is to take a hot city like Shanghai or Beijing, and count the number of windows lit up at night on a standard 30 story concrete apartment building. You'll find something like 25% of the units never light up. Now, those are in cities where people want to live, it is much worse in lower tier cities and new districts without services or jobs of lower tier cities. Property taxes in the US mean you can't speculate so easily on property (you lose ~1% value a year). But they have 99 year leases instead, but everyone thinks the government will let you renew those with minimal fees.
  - mrguyorama 2y ago
    >"Real Estate is Investment" should naturally lead to overproduction as investment-only properties get built to satisfy that demand—as we see in China China had massive home overproduction because the goddamned totalitarian government told builders to build or else. It was not market forces. How do you suppose we do that in the US? Especially with this administration? In the US, builders don't build 100 starter homes because it is more profitable and easier to build a couple McMansions and sell them for crazy prices. THOSE are the homes that get built as "investments". No builder will benefit from producing a large supply of homes, so they don't. The market will not self correct.
    - _DeadFred_ 2y ago
      In China, the local government gets income from leasing new construction land for 99 years, hence the incentive to build. In the US, the largest amount of government land is held by the Feds and they keep increasing the limits on what the land can be used for year after year. Figure out how to make new home building key to government finances like in China and you will INSTANTLY have the problem solved and even have over supply.
- SR2Z 2y ago
  Whether or not real estate is a good investment depends on supply growth. You have the causality backwards.
- dnissley 2y ago
  Only if there is unlimited investors
- j1elo 2y ago
  Sometimes I dream with a wishful solution like defining areas of "great living desirability" (basically the cities where seemingly majority of people compete to live in), and charge a yearly tax of N% the market value of each home (with crazy high N, like 20), for owners who have more than M units in that area (with a convervative M, like 3 or even 2). ...You'll see how greedy investors flee fast, and the remaining buyers are honest people who don't want to speculate, but to actually own a home where to actually live.
cyberax 2y ago
No, it's not. Supply of housing is not in any way limited. Cities are desperately fighting a rearguard action against greedy developers plopping multi-story monstrosities in former SFH areas. All in the name of "affordable housing". While the supply of house units per capita is at the record-high levels. Reality: housing is cheap, abundant, and high quality. Just not near the downtown cores of large cities.

Supply is artificially limited.

by wpm 2y ago

Supply is artificially limited.

vidanay 2y ago

Not commercial RE

graeme 2y ago
Yes it is. There's no zoning law that says "You can only build houses here, no apartment, unless you build commercial real estate" Commercial real estate is generally illegal anywhere dense housing is also illegal.
darth_avocado 2y ago
Commercial RE too. When you say supply is constrained, they don’t mean there’s no RE available, they mean RE isn’t available at a lower price. Most cities in the US right now have a huge commercial RE vacancy rate, yet if you try to lease it, you’re not getting rates that a free market low demand situation is going to get you.

Tade0 2y ago

Supply can't possibly keep up when real estate is used as an investment. As an analogy to the dead internet hypothesis I present the dead real estate market hypothesis. Increasingly it's just investors buying and selling properties from each other. And it's not just a hypothesis. China built enough homes to house its population twice over, yet it's not reflected in the prices. All because everyone and their grandma is investing in real estate.

WorldMaker 2y ago
This is the lesson the board game Monopoly was originally intended to teach. The Georgism side of "The Landlord's Game" sometimes feels as relevant as ever, and as obvious as ever why those rules not packed into the game by Hasbro. (They aren't fun and we don't actually want to question what real estate ownership should mean.)
UltraSane 2y ago
It isn't a hypothesis. It is a well known fact. The more expensive a property is the more time it will be spent vacant because a lot of the very expensive properties are just uses as investments.
- apwell23 2y ago
  why doesn't someone introduce a legislation to tax vacant second homes at astronomical rates
  - throw5959 2y ago
    Do you know who owns most real estate either directly or indirectly? Pension funds. And who wants to shake up their pension? Nobody. It's the most democratized form of asset ownership, literally everybody is going to get angry. And secondly... Are the second vacation homes really the problem? I'd guess the problem begins around 3rd or 5th, not the second one, which is a fairly common and usually also a good thing to have - for both the owner and the society.
    - apwell23 2y ago
      not talking about real estate in general. whats the proof that most vacant homes are owned by pension funds ? I don't think so.
    - hello_moto 2y ago
      Second vacation homes (plus Airbnb) become a problem for locals of that area. The young ones can't survive there and eventually have to rent (or provided as comp package) from established businesses (B&B/hotel).
    - radlad 2y ago
      > And secondly... Are the second vacation homes really the problem? I'd guess the problem begins around 3rd or 5th, not the second one, which is a fairly common and usually also a good thing to have - for both the owner and the society. I'm not sure if you mean owning one primary home and two vacation homes, or one primary home and one vacation home when you mention a "second vacation home," but either way this strikes me as out of touch. In 2024, US home ownership rate is 65.6%. (https://www.bankrate.com/homeownership/home-ownership-statistics/ https://www.bankrate.com/homeownership/home-ownership-statis...) In 2022, 4.6% of housing was comprised of second homes. (https://eyeonhousing.org/2024/09/the-nations-stock-of-second-homes-2/ https://eyeonhousing.org/2024/09/the-nations-stock-of-second...) 4.6% of 65.6% is 3%, meaning at most 3% of Americans own a second home (but this doesn't account for citizens that own 3 or more homes, so the actual percentage is even lower.) I don't consider that to be common. I also wonder: why is it a good thing for society (or even most homeowners?)
jrwoodruff 2y ago
Also made possible by the internet and computers in general, I'd argue. Without the easy availability of prices, sales data, and general number crunching capabilities I don't think this would be happening. Certainly not at the scale we're seeing.
janalsncm 2y ago
> enough homes to house its population twice over This is because a ton of them are in the Chinese equivalent of like Boise, Idaho where demand is fairly low. People want to live where the high paying jobs are.
- tomrod 2y ago
  Bad example, Boise is a hot and desirable market. Better example: northern Alaska.
  - seanmcdirmid 2y ago
    Alaska in general. Fairbanks, Anchorage, Ketchikan are currently in decline, as is Alaska as a whole.
- luhn 2y ago
  I get your point, but that's a terrible example because Boise is one of the fastest growing metro areas in the country.
7thaccount 2y ago
Agreed, but one thing to note on the Chinese real estate is that a lot of it is apparently "tofu dregs", so a good portion of the real estate is just a building waiting to fall down that you can crumble with your bare hands (lots of YouTube videos on this) and a lot of the supply is also in the middle of nowhere. So the supply is kind of not as much there as you would normally think. To use an analogy, does building a massive housing complex in the middle of the Mojave help American home prices come down?
zamfi 2y ago
> China built enough homes to house its population twice over, yet it's not reflected in the prices. All because everyone and their grandma is investing in real estate. Yes, but this is reflected in China's vacancy rate: 22% by some estimates. In the US, home vacancy rates are sub-1%. Not saying people aren't treating homes as investments, but it seems clear we also have a supply issue. "Real Estate is Investment" should naturally lead to overproduction as investment-only properties get built to satisfy that demand—as we see in China. In the US, we don't see that.
- seanmcdirmid 2y ago
  The methodology is to take a hot city like Shanghai or Beijing, and count the number of windows lit up at night on a standard 30 story concrete apartment building. You'll find something like 25% of the units never light up. Now, those are in cities where people want to live, it is much worse in lower tier cities and new districts without services or jobs of lower tier cities. Property taxes in the US mean you can't speculate so easily on property (you lose ~1% value a year). But they have 99 year leases instead, but everyone thinks the government will let you renew those with minimal fees.
- mrguyorama 2y ago
  >"Real Estate is Investment" should naturally lead to overproduction as investment-only properties get built to satisfy that demand—as we see in China China had massive home overproduction because the goddamned totalitarian government told builders to build or else. It was not market forces. How do you suppose we do that in the US? Especially with this administration? In the US, builders don't build 100 starter homes because it is more profitable and easier to build a couple McMansions and sell them for crazy prices. THOSE are the homes that get built as "investments". No builder will benefit from producing a large supply of homes, so they don't. The market will not self correct.
  - _DeadFred_ 2y ago
    In China, the local government gets income from leasing new construction land for 99 years, hence the incentive to build. In the US, the largest amount of government land is held by the Feds and they keep increasing the limits on what the land can be used for year after year. Figure out how to make new home building key to government finances like in China and you will INSTANTLY have the problem solved and even have over supply.
SR2Z 2y ago
Whether or not real estate is a good investment depends on supply growth. You have the causality backwards.
dnissley 2y ago
Only if there is unlimited investors
j1elo 2y ago
Sometimes I dream with a wishful solution like defining areas of "great living desirability" (basically the cities where seemingly majority of people compete to live in), and charge a yearly tax of N% the market value of each home (with crazy high N, like 20), for owners who have more than M units in that area (with a convervative M, like 3 or even 2). ...You'll see how greedy investors flee fast, and the remaining buyers are honest people who don't want to speculate, but to actually own a home where to actually live.

cyberax 2y ago

No, it's not. Supply of housing is not in any way limited. Cities are desperately fighting a rearguard action against greedy developers plopping multi-story monstrosities in former SFH areas. All in the name of "affordable housing". While the supply of house units per capita is at the record-high levels. Reality: housing is cheap, abundant, and high quality. Just not near the downtown cores of large cities.