5 ms·

There are two (I mean three) reasons that home prices are inflated. 1. There are a lot of people trying to buy homes vs the supply of available homes on the m

by bb88 2y ago

There are two (I mean three) reasons that home prices are inflated. 1. There are a lot of people trying to buy homes vs the supply of available homes on the market. 2. Rich people are looking for investments in real estate and buying up property to lease or rent it back out at even a higher market rate. Edited to add: 3. Zoning restricted to keep new construction of high density housing from being built.

davidw 2y ago
Also the same rich people fight tooth and nail when someone wants to build housing near them - and especially if the homes being built are something besides a single detached unit.
- bb88 2y ago
  Thanks for pointing that out.
- ty6853 2y ago
  It's the same problem as asking some crypto bro or stock holder if they want to mint new tokens/shares, why would they? It's a difficult problem to solve. Land in many places has almost all its value as a license token to build a constrained set of things. In the extreme, if density could reach infinity at a point it would render everyone else's land close to worthless for residential purposes. Once you start to look at real estates as tokens instead of land you start to realize what an intractable problem zoning is, as all the stakeholders have every reason to sabotage it.
  - bb88 2y ago
    I think the ability to own property should be a fundamental right. More so than you're ability to convince a zoning board to not build high density housing.
chii 2y ago
> prices are inflated the word 'inflated' presumes that the price is higher than _it should be_. The underlying assumption is that homes _should_ cost less, and the current price is artificially high. It isn't. The price if a house is not artificially high - it is high for market driven reasons. Therefore, it is a market price. Nobody is inflating the price via some nefarious scheme.
- bb88 2y ago
  In a free, fair, and regulated market. Yes. I agree with you.
- davidw 2y ago
  Housing is one of the most highly regulated markets there are. There are all kinds of rules and regulations - primarily zoning codes - that have the effect of limiting the amount of housing in a given area.
- charlie90 2y ago
  You dont need a nefarious scheme to have a market bubble.
- ty6853 2y ago
  >Nobody is inflating the price via some nefarious scheme. Lol I built a house from scratch including all labor and legal aspects. Almost the whole system is designed as a nefarious scheme to grandfather in the prior generation while kicking anyone in the teeth who wants to build a place the way the voters had their own houses built 50 years ago.
- quantified 2y ago
  Simply via other schemes.
- UtopiaPunk 2y ago
  If housing feels expensive, and there are a lot of people who would like to buy a house, then under a free market, a greedy landlord simply needs to build a 6-plex or an apartment complex to make lots of money. More people living on one plot of land should reduce costs for the individuals living there, and the landlord should still make tons of money because they are renting to, say, six families instead of one. Another greedy landlord sees this success and does something similar - the market price has been suppressed a tiny bit, but the demand is so huge and supply so low, it is barely a blip. Do this many times over, though, and we'd expect to see denser and cheaper housing over time. Landlords and developers should essentially be competing for customers by offering an attractive product (ideally, some healthy balance between good prices and good quality). Why don't we see that happening at a meaningful scale? Because the housing market is not free - it's regulated very very badly. Where developers can build, there is a huge amount of red-tape and often a crushing process of input from neighbors - neighbors who, mind you, already own their own houses, so this new development would never be used by them. And these neighbors are also strongly incentived to keep their property values as high as possible, as owning a house has very much become an investment. It's no wonder that home owners find all kinds of reasons to say no to denser developments near their homes. And then there's the fact that huge swathes of attractive neighborhoods are zoned for single-family homes. Developers cannot even legally consider building in such areas (and I encourage you to look into this for a city near you, it's shocking). In LA, of all the land that is zoned for residential use at all, about 75% is zoned as single-family housing. Los Angeles! I'm not a strong proponent of the "free" market, but bad regulation is a nightmare.
7e 2y ago
Home prices go up because humans breed like crazy and overrun their habitats.
Balgair 2y ago
One major disturbance to 1) in CA is Prop 13 Property Taxes in CA are determined based on the time of purchase. They are only allowed to go up 2% per year, while the rise in market value increases much faster. Meaning that you are highly incentivized to hold on to property, thereby reducing supply more so than other property markets in the US. This kinda distorts 3) as well, since you also want to protect that investment and then you get NIMBY stuff too. CA is trying to fix things by disallowing cities from blocking new construction, but it's slow going. on the legal side.
- ryathal 2y ago
  Many states have similar laws and they don't see the same massive real estate costs. High property cost is almost entirely demand based.
  - Balgair 2y ago
    I'm sorry. What other state has it so that taxes only reset upon sale?
    - ryathal 2y ago
      Maine, New Hampshire, Tennessee, and Vermont are the only states that don't have any limits on the increase in property taxes. California may be on the low end at 3%, but most are limiting to less than 10% growth. You can read more here https://www.kiplinger.com/taxes/property-tax-cap-by-state https://www.kiplinger.com/taxes/property-tax-cap-by-state
Over2Chars 2y ago
Spot on @bb88. What do you suppose are the fixes?
- bb88 2y ago
  Kill everyone and start over?
  - Over2Chars 2y ago
    Hmm. I was thinking more like liberalizing housing construction regulation, and encouraging competition in construction.
    - bb88 2y ago
      The problem with freedom in California, is that they see freedom as the freedom to not have high density housing near you. I literally think until those people have no where to live, will the politics change.
      - Over2Chars 2y ago
        I guess Adam Smith's invisible hand is so hard to see it seems non-existent. But I see your point, I think.

by bb88 2y ago

davidw 2y ago

Also the same rich people fight tooth and nail when someone wants to build housing near them - and especially if the homes being built are something besides a single detached unit.

bb88 2y ago
Thanks for pointing that out.
ty6853 2y ago
It's the same problem as asking some crypto bro or stock holder if they want to mint new tokens/shares, why would they? It's a difficult problem to solve. Land in many places has almost all its value as a license token to build a constrained set of things. In the extreme, if density could reach infinity at a point it would render everyone else's land close to worthless for residential purposes. Once you start to look at real estates as tokens instead of land you start to realize what an intractable problem zoning is, as all the stakeholders have every reason to sabotage it.
- bb88 2y ago
  I think the ability to own property should be a fundamental right. More so than you're ability to convince a zoning board to not build high density housing.

chii 2y ago

> prices are inflated the word 'inflated' presumes that the price is higher than _it should be_. The underlying assumption is that homes _should_ cost less, and the current price is artificially high. It isn't. The price if a house is not artificially high - it is high for market driven reasons. Therefore, it is a market price. Nobody is inflating the price via some nefarious scheme.

bb88 2y ago
In a free, fair, and regulated market. Yes. I agree with you.
davidw 2y ago
Housing is one of the most highly regulated markets there are. There are all kinds of rules and regulations - primarily zoning codes - that have the effect of limiting the amount of housing in a given area.
charlie90 2y ago
You dont need a nefarious scheme to have a market bubble.
ty6853 2y ago
>Nobody is inflating the price via some nefarious scheme. Lol I built a house from scratch including all labor and legal aspects. Almost the whole system is designed as a nefarious scheme to grandfather in the prior generation while kicking anyone in the teeth who wants to build a place the way the voters had their own houses built 50 years ago.
quantified 2y ago
Simply via other schemes.
UtopiaPunk 2y ago
If housing feels expensive, and there are a lot of people who would like to buy a house, then under a free market, a greedy landlord simply needs to build a 6-plex or an apartment complex to make lots of money. More people living on one plot of land should reduce costs for the individuals living there, and the landlord should still make tons of money because they are renting to, say, six families instead of one. Another greedy landlord sees this success and does something similar - the market price has been suppressed a tiny bit, but the demand is so huge and supply so low, it is barely a blip. Do this many times over, though, and we'd expect to see denser and cheaper housing over time. Landlords and developers should essentially be competing for customers by offering an attractive product (ideally, some healthy balance between good prices and good quality). Why don't we see that happening at a meaningful scale? Because the housing market is not free - it's regulated very very badly. Where developers can build, there is a huge amount of red-tape and often a crushing process of input from neighbors - neighbors who, mind you, already own their own houses, so this new development would never be used by them. And these neighbors are also strongly incentived to keep their property values as high as possible, as owning a house has very much become an investment. It's no wonder that home owners find all kinds of reasons to say no to denser developments near their homes. And then there's the fact that huge swathes of attractive neighborhoods are zoned for single-family homes. Developers cannot even legally consider building in such areas (and I encourage you to look into this for a city near you, it's shocking). In LA, of all the land that is zoned for residential use at all, about 75% is zoned as single-family housing. Los Angeles! I'm not a strong proponent of the "free" market, but bad regulation is a nightmare.

7e 2y ago

Home prices go up because humans breed like crazy and overrun their habitats.

Balgair 2y ago

One major disturbance to 1) in CA is Prop 13 Property Taxes in CA are determined based on the time of purchase. They are only allowed to go up 2% per year, while the rise in market value increases much faster. Meaning that you are highly incentivized to hold on to property, thereby reducing supply more so than other property markets in the US. This kinda distorts 3) as well, since you also want to protect that investment and then you get NIMBY stuff too. CA is trying to fix things by disallowing cities from blocking new construction, but it's slow going. on the legal side.

ryathal 2y ago
Many states have similar laws and they don't see the same massive real estate costs. High property cost is almost entirely demand based.
- Balgair 2y ago
  I'm sorry. What other state has it so that taxes only reset upon sale?
  - ryathal 2y ago
    Maine, New Hampshire, Tennessee, and Vermont are the only states that don't have any limits on the increase in property taxes. California may be on the low end at 3%, but most are limiting to less than 10% growth. You can read more here https://www.kiplinger.com/taxes/property-tax-cap-by-state https://www.kiplinger.com/taxes/property-tax-cap-by-state

Over2Chars 2y ago

Spot on @bb88. What do you suppose are the fixes?

bb88 2y ago
Kill everyone and start over?
- Over2Chars 2y ago
  Hmm. I was thinking more like liberalizing housing construction regulation, and encouraging competition in construction.
  - bb88 2y ago
    The problem with freedom in California, is that they see freedom as the freedom to not have high density housing near you. I literally think until those people have no where to live, will the politics change.
    - Over2Chars 2y ago
      I guess Adam Smith's invisible hand is so hard to see it seems non-existent. But I see your point, I think.