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House prices aren't inflated. House prices are high because there's not enough supply in and around the jobs. There's not enough supply because of zoning regul

House prices aren't inflated. House prices are high because there's not enough supply in and around the jobs. There's not enough supply because of zoning regulations. Zoning regulations were put in place to keep house prices as high as possible. As long as there's not enough supply to meet demand house prices will trend up towards the maximum the market can afford. When the opposite happens house prices tend towards the cost of construction. Until just a few months ago over 90% of all the residential land in California was zoned single-family exclusive.

philip1209 2y ago
I think the argument is that house prices are high because the government backs housing loans, so they don't represent a free market. Easy access to government creates more demand than supply.
- arcticbull 2y ago
  The reality is that the government backs house prices by preventing construction via zoning rules. Japan shows us that 0% central bank interest rates do not affect pricing so long as supply meets or exceeds demand. [1] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI
  - ty6853 2y ago
    If Japan fixed everyone's house at 0% for 30 years than jacked the rates, the owners would be idiots to sell for anything but a hefty added premium as they're sitting on a money printing machine of negative real interest rates. Unless something else is going on like the property having weird upkeep laws that make it tough to just use as is for decades.
    - deleted 2y ago
      [deleted]
gjsman-1000 2y ago
> there's not enough supply in and around the jobs Why the anger at immigrants lately? Hint: 11.2 million illegal immigrants need to live somewhere. (Personally, I think the smaller regional banks have more responsibility to answer for this.) If Trump is successful in his deportation efforts, house prices will likely fall through the floor, and (huge surprise) the poorer and younger ends of society will be extremely grateful, possibly even electing his successor figure. This could have been easily avoided if adequate housing had been constructed.
- arcticbull 2y ago
  > Why the anger at immigrants lately? Hint: 11.2 million illegal immigrants need to live somewhere. Are they really buying this extremely expensive real estate with their low wages? Seems impossible. More likely, they will lower the already very cheap housing in the middle of nowhere. > If Trump is successful in his deportation efforts, house prices will likely fall through the floor, and (huge surprise) the poorer end of society will be extremely grateful, possibly even electing his successor figure. Far more Americans live in owned-homes than not. That's exactly why this problem has been so intractable in the first place. Those folks will not be happy.
  - gjsman-1000 2y ago
    > Far more Americans live in owned-homes than not. Boomers are 21% of the population, but 38% of the homes. Only 54% of Millennials are homeowners. It's great if you're in the wealthy populous old generation; if you're young and hungry or even just an average person in their 30s, you're angry. > Are they really buying this extremely expensive real estate with their low wages? Seems impossible. No; [illegal immigrant] families pool multiple low wages together and buy houses together.
    - arcticbull 2y ago
      > Boomers are 21% of the population, but 38% of the homes. Only 54% of Millennials are homeowners. 2/3 of Americans own homes. > No; families pool multiple low wages together and buy houses together. So the whole family will be mad when their home equity goes down.
ty6853 2y ago
Interest rates were pinned near zero, then locked in by mortgage holders for decades, the fed bought up some mortgage products, then rates were jacked. Supply is part the problem but essentially what happened was a magic trick where mortgagable real estate holders transferred wealth to themselves from non owners via inflation through the force of the state. To buy them out of their negative real rate mortgage you must compensate them handsomely for losing such a loan that essentially lets them take from everyone else via fed induced inflation. This is why prices have been so sticky despite the now higher rates.
- arcticbull 2y ago
  Interest rates were near zero for decades in Japan and house prices didn't budge since 1995. When rates go down prices jump, they don't keep moving as a result. It's an impulse response. [edit] Look at the chart of housing CPI and the chart of interest rates. They're basically uncorrelated. [1] https://fred.stlouisfed.org/series/CPIHOSNS https://fred.stlouisfed.org/series/CPIHOSNS [2] https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US
  - ty6853 2y ago
    I'm referring to the covid era accumulated impulse.
    - arcticbull 2y ago
      So why are prices still going up at the exact same rate despite 30Y mortgage rates going from 2.x% to 7.x%
      - ty6853 2y ago
        Prices are not going up at anything like the rate they did during the impulse event of low interest mania. They're flattening out but not lowering, as the price of buying out the opportunity cost of losing someone else's fixed low interest loan rises as interest rates rise.
sandbx 2y ago
there are 20,000 permitted multifamily units around Boston that have gotten through zoning but aren't being built because they don't pencil out. [1] I used to think zoning was the only thing in the way, but I think there are other problems, too. [1] https://www.bostonglobe.com/2024/07/05/business/housing-construction-costs-suffolk-downs-greater-boston/ https://www.bostonglobe.com/2024/07/05/business/housing-cons...
jayd16 2y ago
I think it's a blessing that these fires have mostly hit lower density homes. I'm not saying we can't think about more density but I'm not sure we should pack the Palisades and and Hollywood hills to to the gills.
charlie90 2y ago
>House prices are high because there's not enough supply in and around the jobs. The median home price in Los Angeles tripled from 2010. The population in Los Angeles has declined since 2010.

philip1209 2y ago

I think the argument is that house prices are high because the government backs housing loans, so they don't represent a free market. Easy access to government creates more demand than supply.

arcticbull 2y ago
The reality is that the government backs house prices by preventing construction via zoning rules. Japan shows us that 0% central bank interest rates do not affect pricing so long as supply meets or exceeds demand. [1] [1] https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI https://fred.stlouisfed.org/series/JPNCPIHOUAINMEI
- ty6853 2y ago
  If Japan fixed everyone's house at 0% for 30 years than jacked the rates, the owners would be idiots to sell for anything but a hefty added premium as they're sitting on a money printing machine of negative real interest rates. Unless something else is going on like the property having weird upkeep laws that make it tough to just use as is for decades.
  - deleted 2y ago
    [deleted]

gjsman-1000 2y ago

> there's not enough supply in and around the jobs Why the anger at immigrants lately? Hint: 11.2 million illegal immigrants need to live somewhere. (Personally, I think the smaller regional banks have more responsibility to answer for this.) If Trump is successful in his deportation efforts, house prices will likely fall through the floor, and (huge surprise) the poorer and younger ends of society will be extremely grateful, possibly even electing his successor figure. This could have been easily avoided if adequate housing had been constructed.

arcticbull 2y ago
> Why the anger at immigrants lately? Hint: 11.2 million illegal immigrants need to live somewhere. Are they really buying this extremely expensive real estate with their low wages? Seems impossible. More likely, they will lower the already very cheap housing in the middle of nowhere. > If Trump is successful in his deportation efforts, house prices will likely fall through the floor, and (huge surprise) the poorer end of society will be extremely grateful, possibly even electing his successor figure. Far more Americans live in owned-homes than not. That's exactly why this problem has been so intractable in the first place. Those folks will not be happy.
- gjsman-1000 2y ago
  > Far more Americans live in owned-homes than not. Boomers are 21% of the population, but 38% of the homes. Only 54% of Millennials are homeowners. It's great if you're in the wealthy populous old generation; if you're young and hungry or even just an average person in their 30s, you're angry. > Are they really buying this extremely expensive real estate with their low wages? Seems impossible. No; [illegal immigrant] families pool multiple low wages together and buy houses together.
  - arcticbull 2y ago
    > Boomers are 21% of the population, but 38% of the homes. Only 54% of Millennials are homeowners. 2/3 of Americans own homes. > No; families pool multiple low wages together and buy houses together. So the whole family will be mad when their home equity goes down.

ty6853 2y ago

Interest rates were pinned near zero, then locked in by mortgage holders for decades, the fed bought up some mortgage products, then rates were jacked. Supply is part the problem but essentially what happened was a magic trick where mortgagable real estate holders transferred wealth to themselves from non owners via inflation through the force of the state. To buy them out of their negative real rate mortgage you must compensate them handsomely for losing such a loan that essentially lets them take from everyone else via fed induced inflation. This is why prices have been so sticky despite the now higher rates.

arcticbull 2y ago
Interest rates were near zero for decades in Japan and house prices didn't budge since 1995. When rates go down prices jump, they don't keep moving as a result. It's an impulse response. [edit] Look at the chart of housing CPI and the chart of interest rates. They're basically uncorrelated. [1] https://fred.stlouisfed.org/series/CPIHOSNS https://fred.stlouisfed.org/series/CPIHOSNS [2] https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US
- ty6853 2y ago
  I'm referring to the covid era accumulated impulse.
  - arcticbull 2y ago
    So why are prices still going up at the exact same rate despite 30Y mortgage rates going from 2.x% to 7.x%
    - ty6853 2y ago
      Prices are not going up at anything like the rate they did during the impulse event of low interest mania. They're flattening out but not lowering, as the price of buying out the opportunity cost of losing someone else's fixed low interest loan rises as interest rates rise.

sandbx 2y ago

there are 20,000 permitted multifamily units around Boston that have gotten through zoning but aren't being built because they don't pencil out. [1] I used to think zoning was the only thing in the way, but I think there are other problems, too. [1] https://www.bostonglobe.com/2024/07/05/business/housing-construction-costs-suffolk-downs-greater-boston/ https://www.bostonglobe.com/2024/07/05/business/housing-cons...

jayd16 2y ago

I think it's a blessing that these fires have mostly hit lower density homes. I'm not saying we can't think about more density but I'm not sure we should pack the Palisades and and Hollywood hills to to the gills.

charlie90 2y ago

>House prices are high because there's not enough supply in and around the jobs. The median home price in Los Angeles tripled from 2010. The population in Los Angeles has declined since 2010.