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I always felt like this was kind of obvious. People love to say housing supply will lower prices, and it's probably slightly true, but it's fairly clear that ho
by ajkjk 2y ago
I always felt like this was kind of obvious. People love to say housing supply will lower prices, and it's probably slightly true, but it's fairly clear that house prices go up in places that people have money, and they go up proportional to the money. In the US the rich have comically more money than the poor--100s or 1000s of times as much, comparing the surplus that a wealthy tech employee has to put towards a house fund compared to a person living paycheck to paycheck. And then the rich will then buy vacation homes, pied-a-terres, etc, with their huge excess. Who would put money into building for people who have no money when those people are out there?
Rent on the other hand is likely more supply/demand based because it is actually possible to have empty units due to overbuilding if the local economy shifts. But even still they are motivated to hold units empty and keep the price high to wait for a rich person who can afford it to come along. (Not to mention algorithmically colluding so as to not actually compete on price.)
I cannot imagine how housing could ever become more affordable for the poor unless the income disparity lowers, short of some sort of price-fixing governmental action.
- jaredklewis 2y ago> short of some sort of price-fixing governmental action. Well rent control has a long, well documented history of bad outcomes. Doesn't exactly make me eager to let the government set all the prices. I think a sufficiently high land value tax would either discourage excess housing speculation by the rich, or raise enough revenue to support wealth redistribution schemes that erode what you identify as being the cause of the issue.
- verteu 2y agoReally? https://i.imgur.com/BMsPrKY.png https://i.imgur.com/BMsPrKY.png Seems to correlate pretty well to me. Per [1] and [2], YoY home prices are decreasing in most regions with high % change in homes built ("New housing units authorized per 1k existing (2021)"), eg: Austin, Jacksonville, Houston, Phoenix, Nashville, Phoenix, Raleigh. [1] https://constructioncoverage.com/research/cities-investing-most-in-new-housing https://constructioncoverage.com/research/cities-investing-m... [2] https://www.zillow.com/home-values/10221/austin-tx/#/ https://www.zillow.com/home-values/10221/austin-tx/#/
- ajkjk 2y agoIt seems more correct to say that supppy/demand drives a ~second order effect. But the first order term has to do with how much money people have (well and there's the interplay with where those people want to live). That is what distinguishes low vs high cost of living areas, after all. It's also what differentiates prices today from prices twenty years ago. And gentrification is not driven by supply/demand per se but by the hand-in-hand growth of desirability and income.
- verteu 2y ago> the first order term has to do with how much money people have (well and there's the interplay with where those people want to live). That is the demand curve in a supply-demand model.
- ajkjk 2y agoSure, but is a lot more complicated than that when you factor in people and companies changing markets, building happening at different price points, etc.
- deleted 2y ago[deleted]
- verteu 2y agoBut "people and companies changing markets" is encoded in the slope of the demand curve, and "building happening at different price points" is encoded in the slope of the supply curve, right?
- deleted 2y ago[deleted]
- closeparen 2y agoThe 95th percentile household income in the Bay Area is $250k. That corresponds to a house around $1.2 million: well below the median. Your relative position in a housing market that's outpacing inflation is mostly based on when you got in, not your relative income.
- ajkjk 2y agoTrue. But it's only really interesting to think about what people are presently buying houses for (and what makes them want to move) when thinking about pricing effects.
- closeparen 2y agoMy point is I don't think people buying houses at current prices are doing it with wage income, even from very high-income jobs.
- ajkjk 2y agoI mean... tech people are. Even wage workers can get into the millions when stock grants are included.
- closeparen 2y agoYou can look up what tech people make, and what houses on the Peninsula cost. There is very little overlap.
- crooked-v 2y ago> but it's fairly clear that house prices go up in places that people have money, and they go up proportional to the money Yes, because there's not enough housing, so housing prices end up being set by the upper averages of whatever people can theoretically pay. > Who would put money into building for people who have no money when those people are out there? The builders who are still looking for work after there's actually enough housing to match demand by the wealthy.
- ajkjk 2y agoYes, if that state was reached, we would see supply go up and prices drop. In the HCOL areas I'm aware that state seems ever further away, seeing as how they're still building luxury stuff everywhere.
- crooked-v 2y agoIt seems "ever further away" because most cities in the US are literally decades behind on building enough housing. It's going to take drastic anti-NIMBY overhauls to allow enough to be built to actually catch up.