5 ms·

> It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving t

> It's not new affordable housing, but the people moving in to the new expensive houses are leaving their old houses, and the people who buy those are leaving their old houses, so eventually the price drops happen on the older, smaller homes at the bottom end of the market. I keep seeing this, but if the housing being vacated is in a different, less-desirable market, it's a bit tree-falling-in-the-woods for locals. If a $450,000 house in a Chicago suburb is freed up by its owners moving to a $700,000 condo in Seattle, the people who can't afford a house in Seattle don't see the benefit of the condo building and aren't going to buy the house in Chicago, and the people who can't afford a house in Chicago don't recognize the Seattle development as the cause of the house hitting the market.

whall6 1y ago
There doesn’t need to be a connection between the purchase and sale events. Any marginal unit of inventory added to a market will place downward pressure on the price of that inventory (i.e., make it more affordable). The reverse is true for a marginal bid for inventory. The effect is so minimal when you zoom into a single sale of one home and purchase of one condo, but in aggregate this causes real noticeable price movement.
ASinclair 1y ago
> If a $450,000 house in a Chicago suburb is freed up by its owners moving to a $700,000 condo in Seattle, the people who can't afford a house in Seattle don't see the benefit of the condo building and aren't going to buy the house in Chicago Is the existence of the $700,000 condo the limiting factor for those people moving? If it isn't built would they instead bid up an existing unit in Seattle and put it more out of reach of existing Seattle residents?
- deleted 1y ago
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mediaman 1y ago
This analogy seems confused. If someone in Chicago moves to Seattle, then our policy options are (1) no new condo in Seattle or (2) new condo in Seattle. Under policy 1, the new buyer from Chicago must outbid locals for the fixed housing supply; they will wind up buying older housing stock, which otherwise would have gone to existing local residents. Prices go up. With policy 2, the new entrant buys the new condo and does not compete for pre-existing housing stock. In this scenario, whatever house is freed up in Chicago is irrelevant to the housing stock in Seattle. I'm not sure why you included it. The entire question can be contained by the assumption that "there is someone new coming to Seattle" and whether it would be better to have a new condo unit to sell to them or have them compete for existing fixed stock. The whole bit about the Chicago housing market is a distractor, because it stays the same under either policy.
- seanmcdirmid 1y ago
  > The entire question can be contained by the assumption that "there is someone new coming to Seattle" and whether it would be better to have a new condo unit to sell to them or have them compete for existing fixed stock. The whole bit about the Chicago housing market is a distractor, because it stays the same under either policy. Are you denying that induced demand is a thing for housing? That everyone who wants to move to Seattle will move there regardless of housing prices, and no one will leave because they get squeezed out of the housing market by new arrivals? Or is there a more nuanced argument that I'm missing? That new condo allows one more family to live in Seattle regardless, whereas if they were competing with existing stock, some family would probably have to leave. We could play a few rounds of musical chairs to prove that fact.
  - mediaman 1y ago
    Yes, people are going to get squeezed out of the housing market by new arrivals if new housing stock isn't built. "Squeezing out" is done by a price mechanism: a family that would prefer to stay in Seattle decides to sell, because that new buyer (unable to buy the condo, because it hasn't been built) decides to offer a high enough price to induce the existing family to leave. That's only done by reducing housing affordability (increasing prices) which is the public policy outcome we're trying to avoid. It sounds like you agree that new supply is good, I think, because you believe new entrants would otherwise "squeeze out" existing residents and I assume you would agree that this is done by price, and so therefore you would also agree that new housing stock (which decreases the "squeezing") also suppresses price level relative to the alternative fixed stock scenario.

whall6 1y ago

There doesn’t need to be a connection between the purchase and sale events. Any marginal unit of inventory added to a market will place downward pressure on the price of that inventory (i.e., make it more affordable). The reverse is true for a marginal bid for inventory. The effect is so minimal when you zoom into a single sale of one home and purchase of one condo, but in aggregate this causes real noticeable price movement.

ASinclair 1y ago

> If a $450,000 house in a Chicago suburb is freed up by its owners moving to a $700,000 condo in Seattle, the people who can't afford a house in Seattle don't see the benefit of the condo building and aren't going to buy the house in Chicago Is the existence of the $700,000 condo the limiting factor for those people moving? If it isn't built would they instead bid up an existing unit in Seattle and put it more out of reach of existing Seattle residents?

deleted 1y ago
[deleted]

mediaman 1y ago

This analogy seems confused. If someone in Chicago moves to Seattle, then our policy options are (1) no new condo in Seattle or (2) new condo in Seattle. Under policy 1, the new buyer from Chicago must outbid locals for the fixed housing supply; they will wind up buying older housing stock, which otherwise would have gone to existing local residents. Prices go up. With policy 2, the new entrant buys the new condo and does not compete for pre-existing housing stock. In this scenario, whatever house is freed up in Chicago is irrelevant to the housing stock in Seattle. I'm not sure why you included it. The entire question can be contained by the assumption that "there is someone new coming to Seattle" and whether it would be better to have a new condo unit to sell to them or have them compete for existing fixed stock. The whole bit about the Chicago housing market is a distractor, because it stays the same under either policy.

seanmcdirmid 1y ago
> The entire question can be contained by the assumption that "there is someone new coming to Seattle" and whether it would be better to have a new condo unit to sell to them or have them compete for existing fixed stock. The whole bit about the Chicago housing market is a distractor, because it stays the same under either policy. Are you denying that induced demand is a thing for housing? That everyone who wants to move to Seattle will move there regardless of housing prices, and no one will leave because they get squeezed out of the housing market by new arrivals? Or is there a more nuanced argument that I'm missing? That new condo allows one more family to live in Seattle regardless, whereas if they were competing with existing stock, some family would probably have to leave. We could play a few rounds of musical chairs to prove that fact.
- mediaman 1y ago
  Yes, people are going to get squeezed out of the housing market by new arrivals if new housing stock isn't built. "Squeezing out" is done by a price mechanism: a family that would prefer to stay in Seattle decides to sell, because that new buyer (unable to buy the condo, because it hasn't been built) decides to offer a high enough price to induce the existing family to leave. That's only done by reducing housing affordability (increasing prices) which is the public policy outcome we're trying to avoid. It sounds like you agree that new supply is good, I think, because you believe new entrants would otherwise "squeeze out" existing residents and I assume you would agree that this is done by price, and so therefore you would also agree that new housing stock (which decreases the "squeezing") also suppresses price level relative to the alternative fixed stock scenario.