3 ms·

> There is no "law of supply and demand" in the real market, only in textbooks. Louder for the people in the back. If sellers are not in a particular rush to

> There is no "law of supply and demand" in the real market, only in textbooks. Louder for the people in the back. If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. They will simply hold stock until such time as it sells, confident that it will. Does that always pay off? Not necessarily but with housing both in the selling and renting markets, it does so often that I don't think any particular holder of real estate is too worried about it. You can sit on vacant property to your heart's content and somewhere down the line, someone, or some company, will likely meet or exceed what you're looking to get out of it. Real estate also has the handy benefit in it's basically guaranteed to hold value, and it's unexpected if it doesn't increase in value year over year.

mlyle 2y ago
> If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. This just says that supply isn't very elastic at that point. It's hardly the only market where supply or demand isn't extremely elastic. Understanding that supply and demand might not be straight lines of unit slope is an econ 101 concept. > Real estate also has the handy benefit in it's basically guaranteed to hold value, and it's unexpected if it doesn't increase in value year over year. And the unfortunate cost called property tax which puts a drag on any earnings and compounds losses. It's an asset class like any other. My house did a real 2x after California's low property taxes over the past 20 years, plus there's my owner's imputed rent which is maybe worth another 0.5x for a total return of 2.5x. It's also had tax deferral on the earnings and the values are a little less volatile than the stock market. OTOH my equities did more like 8x over this time.
- mrspuratic 2y ago
  In Ireland as well as property tax we also have a dereliction charge for sites/properties, it's been on the books since 1990, but recently being leveraged (clumsily) to punish land hoarding in urban areas. It's currently 7% p.a. of what somebody declares the market value of the land is, and the land can also be subject to a CPO unless remedied. The LPT local property tax is a fraction of 1% p.a. typically 0.1% (subject to regional and valuation variables).
  - mlyle 2y ago
    Here in California, we tend to have total property tax rates of ~1.5%, which includes improvements like buildings. For various reasons, this is lower than the rest of the country which is more like 2-2.5%. But also, the assessed values of buildings tends to be artificially low in most places. These low assessed values discourage real estate changing hands, because the new owner would often have to pay more. There's a lot of economists who think we should have a higher tax rate, but only on the true market value of the land, to promote efficient usage of real property.
gambiting 2y ago
>>If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. Well but then there is no oversupply, is there? Like if I have an apple and you want to buy an apple, the supply of apples is zero UNLESS I decide to sell. In the meantime I could have 10 thousand apples and the supply is still zero until I want to sell. Houses that are built and not available for sale are not part of the supply.
giantrobot 2y ago
> If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. This issue is compounded because sellers have to them become buyers. People don't sell their house and then drive themselves into the ocean. For most people a house is where they live. If they sell it they need to buy a new one. Their motivation for selling is then a function of the house's potential sale value, their new house's cost, and financing rates for them and their potential buyers. If they currently have a very low fixed rate on their house then a new house at a higher rate isn't attractive depending on their current house's potential sale value. This has the effect of constraining supply and demand.

mlyle 2y ago

> If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. This just says that supply isn't very elastic at that point. It's hardly the only market where supply or demand isn't extremely elastic. Understanding that supply and demand might not be straight lines of unit slope is an econ 101 concept. > Real estate also has the handy benefit in it's basically guaranteed to hold value, and it's unexpected if it doesn't increase in value year over year. And the unfortunate cost called property tax which puts a drag on any earnings and compounds losses. It's an asset class like any other. My house did a real 2x after California's low property taxes over the past 20 years, plus there's my owner's imputed rent which is maybe worth another 0.5x for a total return of 2.5x. It's also had tax deferral on the earnings and the values are a little less volatile than the stock market. OTOH my equities did more like 8x over this time.

mrspuratic 2y ago
In Ireland as well as property tax we also have a dereliction charge for sites/properties, it's been on the books since 1990, but recently being leveraged (clumsily) to punish land hoarding in urban areas. It's currently 7% p.a. of what somebody declares the market value of the land is, and the land can also be subject to a CPO unless remedied. The LPT local property tax is a fraction of 1% p.a. typically 0.1% (subject to regional and valuation variables).
- mlyle 2y ago
  Here in California, we tend to have total property tax rates of ~1.5%, which includes improvements like buildings. For various reasons, this is lower than the rest of the country which is more like 2-2.5%. But also, the assessed values of buildings tends to be artificially low in most places. These low assessed values discourage real estate changing hands, because the new owner would often have to pay more. There's a lot of economists who think we should have a higher tax rate, but only on the true market value of the land, to promote efficient usage of real property.

gambiting 2y ago

>>If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. Well but then there is no oversupply, is there? Like if I have an apple and you want to buy an apple, the supply of apples is zero UNLESS I decide to sell. In the meantime I could have 10 thousand apples and the supply is still zero until I want to sell. Houses that are built and not available for sale are not part of the supply.

giantrobot 2y ago

> If sellers are not in a particular rush to part with a given good, for whatever reason, there is no reason for an over-supply to lead to lower prices. This issue is compounded because sellers have to them become buyers. People don't sell their house and then drive themselves into the ocean. For most people a house is where they live. If they sell it they need to buy a new one. Their motivation for selling is then a function of the house's potential sale value, their new house's cost, and financing rates for them and their potential buyers. If they currently have a very low fixed rate on their house then a new house at a higher rate isn't attractive depending on their current house's potential sale value. This has the effect of constraining supply and demand.